19 September 2017 by lberuti
On the day before the roll – new series of index will be issued tomorrow on all indices except CDX HY which will wait for another week -, investors owning protection did not felt very comfortable. While other risky assets experienced an unremarkable session, credit felt very firm and protection was offered across the board. In Europe, the move was compounded by the very strong performance of the Italian banks. Their risk premia were pushed aggressively tighter – 7bps for Intesa and Mediobanca at 68bps and 85bps respectively, and 8bps for Unicredit at 71bps - after an article in Il Sole mentioned that the Italian finance ministry would be in the process of writing down a plan for new “intermediate bonds”. These should be Non-Preferred Senior (NPS) debt since Italy has tried statutory subordination before. The potential creation of NPS tranche in Italian solvency law has been well flagged before, but investors were not expecting it to form part of the 2018 budget’s section on banking and finance, which means chances are this goes into Parliament mid-October.