24 August 2016 by pdonnat
With the heatwave and the coming long weekend in London, investors found an excuse for staying on the sideline on credit indices. The realized volatility is going down over the last four weeks. The iTraxx Main has just traded in a 5bps range over this period, between 65bps and 70bps, with no trend and little volatility. The credit market is constructive especially on the cash product. The day of Isolux CDS auction - which settled at 15.75% - the financial sector was well supported. Portugal will recapitalize its state-owned bank Caixa Geral de Depositos with 2.7BEuros. Including additional subordinated debt, the plan is close to 5BEuros. The commitment represents close to 3% of Portuguese GDP. This plan is expected to stabilize the Portuguese banking system. The credit market does like more equity in the system. There is no reason to trade wider at the movement. However, risk addition at the current levels does not look very compelling for many investors. The credit index market is in the doldrums.