19 May 2015 by lberuti
It felt like a fairly active day on most asset classes. They were buoyed by Mr Coeuré’s speech in London yesterday, during which he said that the ECB is moderately frontloading its bond purchases in May and June to try and avoid the summer lull which traditionally affects markets in July and August. FX, rates and equities were all impacted in Europe. Credit joined the party, but to a lesser extent. iTraxx Main (ITXEB) underperformed and struggled to break the 60bps level. iTraxx Crossover (ITXEX) did not massively compressed much either and was very sticky as soon as the 275bps level was broken. The fact that the Greek saga has still not reached a conclusion certainly did not help as credit indices are seen by many as a relatively cheap hedge against a negative outcome. But it can also be explained by the option expiry, which takes place tomorrow like every third Wednesday on each month. The dealer community, which is the more likely to run delta hedged portfolios appear to have accumulated chunky positions of the 60 strike on ITXEB and of the 275 strike on ITXEX. Unless we gap tomorrow at the open, the market could be very sticky around these levels until 4pm UK Time, which marks the May option exercise deadline.