18 July 2018 by lberuti
Banks enjoyed a fairly positive start to the week. On Monday, DB (Deutsche Bank AG) surprised the market with an unusual positive profit warning, ahead of the publication of its results next week. Yesterday, RBSGRP (Royal Bank Of Scotland Group Plc) outperformed the broader market after it was upgraded by Moody’s from Baa3 to Baa2. The rating agency explained that “credit risk (had) decreased materially over the past five years, driven by reductions in non-core assets and non-performing loans”. But some shine was taken off the initial 10bps tightening as profit takers emerged and drove the 5-year risk premium back 101bps, only 4bps tighter on the day. That trend was intact during today’s session, and RBSGRP’s 5-year CDS closed at 104bps, back to pre-upgrade levels. It looks as if investors currently struggle to look past the uphill battle Theresa May is fighting to retain her leadership. Yesterday, her government narrowly defeated an amendment initiated by pro-Europe members of the Tory party to her proposed custom bill, after it had to cope with the defections of prominent Brexiteers in the past few weeks. The trend of RBSGRP’s 5-year CDS is resolutely wider since the beginning of February, and it remains intact at the moment.