08 September 2016 by lberuti
While everybody was waiting for the ECB’s possible QE extension this morning, it transpired in the press that VLVY ( Volvo AB ), which is evaluating its options for its bus and construction equipment businesses, would have received an offer from a major Chinese company. The paper did not go so far as naming the bidder, but the truck market has experienced a brutal decline over the last 12 months, particularly in the US where VLVY is a major player, and the perspective of some assets sale was music to the ears of investors. They sent VLVY’s 5-year risk premium 5.5bps tighter at 81.5bps, which is the tightest it has traded in more than a year.
Meanwhile, the broader market, which started the day on a fairly strong footing ahead of the ECB meeting, was left disappointed by Mr Draghi’s decision not to amend their current QE program. Stimulus will not be increased at this point in time, but a committee has been mandated to redesign the QE program and make it more effective. That led to a blip wider on all indices, but investors faded that move in the afternoon, and all was left from it at the end of the session is a 2bps underperformance of iTraxx Financials Senior compared with iTraxx Main.