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That Was Not What We Expected!

14 February 2018 by lberuti

In the past few days, there was a lot of hype ahead of the CPI – Consumer Price Index - number and it seems that its publication could be the main focal point every month in 2018 if this year marks the inflation comeback. There were some jitters in the credit market leading to the release, and, right after it was published higher than analysts had anticipated – at 2.1% vs 1.9% expected -, there was a moment of panic when iTraxx Main (ITXEB) and Crossover (ITXEX) touched their recent wides of 57.5bps and 286bps. But very rapidly profit takers emerged as it seems many investors cannot face the possibility of missing out on a rally, and credit decided to follow equities – which have bounced nicely off their lows on the 200-day moving average – rather than interest rates which kept marching higher – US 10Y interest rate now stands at 2.9% -. At least for now, even though credit had every chance to properly sell off, it looks as if it missed it. Every single credit index closed tighter on the day.