Continued strength in the US labour market is increasing overall expectations for a Fed rate increase by the year end. Central banks appeared to be almost in a holding pattern for most of the month, with the Bank of England being among the most aggressive ahead of a potential hard Brexit. The Bank of England commenced its Corporate Bond Purchase Scheme (CBPS) on September 27 as it extended its QE programme to corporate debt. Markets anticipated the start of the intervention, leading to strong performance in sterling bonds over the summer.

• On October 13, 2016 the US Securities and Exchange Commission (SEC) approved its long-awaited final rules regarding Investment Company Liquidity Risk Management Program and Investment Company Swing Pricing ("Final Rules") alongside new final rules concerning Investment Company Reporting Modernization. We anticipate that the Final Rules will bring liquidity to the front and centre of fund risk management programs. Below we summarize some of the key aspects of the Final Rules
• The average spread basis between North American and European loans ended September back at its one year low of -52bps (originally reached in July) after beginning the month at -43bps
• CDS spreads ended the month on a negative note, driven by financials. The concerns over Deutsche Bank's future, in particular the threat of a CoCo triggering due to the large fine imposed by the US Department of Justice, led to bearish sentiment affecting the whole sector
• Total returns in the Markit iBoxx " Liquid Investment Grade Index were down 1.59%, lagging well behind the unimpressive -0.27% and -0.12% in the Markit iBoxx $ Liquid Investment Grade Index and the Markit iBoxx " Liquid Investment Grade Index, respectively
• Philippines was the worst performing sovereign CDS over the month, widening by 31.5% to 116bps, while Mexico followed with a widening of 20% to 166bps
• Total municipal bond issuance increased by $36.9bn in September, which brings revenue bond issuance 7.9% higher and general obligation issuance 6.7% higher than the same period of time last year
• Most securitised products sectors reached their tightest spreads over the past year in September, with spreads continuing to grind tighter across the broader sector. Increases in US and European consumer ABS supply continue to be met with strong demand from investors

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