15 May 2014 by HCM
The market was getting accustomed to a grind tighter of risk premia in a low volatility environment. Maybe it got a little bit complacent recently, and it got caught off guard today. It is difficult to identify what the exact catalyst for the sell-off was, but the widening was broad based and gathered steam as the day progressed. Cash and CDS alike were under pressure, and even paper issued in the morning and massively oversubscribed (the perpetual bond brought by Axa saw a €7bln order book for a €1bln issue) fared badly in the afternoon (the Axa Perp was trading 0.25pt lower than its reoffer price). What is obvious from this grapple is the underperformance of the names which have been leading the recent march tighter. Financials together with corporates from the periphery are coloured with the brighter shades of red.