01 June 2018 by lberuti
It was a whipsaw week, dominated by negative headlines across Italy and Spain, leading the credit market in a one-way fashion to the widest levels of the series 29 across all indices. They traded in lockstep with the BTP/Bund spread which blew out to 320bps at some stage on Tuesday. Things calmed down after that episode, and synthetic credits came dramatically off their widest levels. If you spent the week on the moon, you would probably wonder what the fuss was all about. We are finishing off the week tighter in iTraxx Crossover (ITXEX) than where we left off last Friday. Equities are firm and cash is feeling strong again. The second part of the week saw a bias towards better selling of protection among the buyside community, with the occasional headline leading credit to gap wider only for it to retest new daily tights. On the week, iTraxx Main (ITXEB) is only 1.5bps wider, iTraxx Financials Senior 3bps wider, iTraxx Financials Subordinated 3bps wider, and ITXEX is 6bps tighter. More than anything else, the main takeaway from the week will be impressive compression between ITXEB and ITXEX.