23 February 2018 by lberuti
There was not a lot of actual news on the tape and most risky assets traded sideways. US equities even managed to creep higher as interest rates eased on both side of the Atlantic (US 10Y lost 5bps at 2.87% and German 10Y lost 5bps at 0.65%). But credit indices did not manage to shake that bearish sentiment. The weakness continued all day and they widened almost in a straight line until mid-afternoon, before stabilising within touching distance of their widest levels of the session. It appears that a few hedge flows were to blame for the continued bid for iTraxx Main CDS, as options providing downside protection expiring late March were particularly sought after. These flows are consistent with the persistent market unease regarding the Italian elections’ outcome as they cover the date of the poll which will be held on the 4th March. Unless of course they are based on one of Kylie’s tweets I may have missed saying that selling protection is “soooo last year”.