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The week that was

23 September 2016 by lberuti

On a one-week horizon, variations have been fairly contained, and the constituents of iTraxx Main eventually moved by roughly 1bp. There was some volatility though as a cautious beginning of the week gave way to an indiscriminate rally on Thursday after Fed members released their estimate for the path of rate increases, which was more benign that previously thought. This week was mostly about Financials though. Banks started on a very weak note as the market was still digesting headlines of potentially huge fines required to settle RMBS cases in the US. Then the rally monkey was let out after the FOMC, only for a big risk reversal to take place late on Thursday afternoon when Monte was rumoured to have to turn to the Italian government for state aid. From then, it was really difficult to source protection on Italian banks, particularly to insure subordinated debt which would be the first impacted in case of bail-in. In the end, banks were the big underperformers on the week.