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Greece Is In Europe… Still

01 June 2015 by lberuti

The mood was cautious today after a week-end which did not bring Greece and their European creditors any closer to a resolution of the current crisis. Credit, which closed wider across the board in Europe, was much more defensive than stocks, which managed to close higher on the day. European credit indices were much more defensive than US credit indices, and both iTraxx Main (ITXEB) and iTraxx Crossover were much more defensive than their respective constituents. We have highlighted recently that ITXEB has underperformed CDXIG. That continued today with ITXEB closing at 67.5bps, 3.75bps wider than CDXIG at 63.75bps. Since this trend really took off 10 days ago, more than half (25cts or 5bps) can be explained by a change in bases. While the basis of CDXIG is going back to -20cts where it belongs for the on the run series, the basis of ITXEB is back in positive territory. If peripherals and financial names have been impacted to some degree by the Greek induced nervousness, the bulk of the bearish views have been expressed using indices.