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The Compression Trend

06 December 2013 by HCM

One of the recent themes in the market has been the hunt for yields. This is obvious on this grapple which shows the outperformance of the CrossOver (European sub investment grade universe) and Financial Subordinated indices compared with the European Main index (investment grade universe). Both tightened almost 20bps in November, while Main was stable. One can also see the breadth of this trend as the volumes were healthy, as shown by the intensity of the colours. In that respect, don’t be fooled by the fact that daily CrossOver volume was 6bln€ compared with 39bln€ for Main: their respective spreads now stand at 330bps and 80bps and people tend to structure carry neutral strategies.