23 May 2014 by HCM
Politics was back on people’s agenda this week. Numerous articles have been written over the last few days regarding the European elections (actually coupled with local ballots in a number of countries) and the impact they could have on the action and/or the stability of coalitions currently governing some countries. That might be a factor behind the wobbles of BTP this week and last which eventually affected most peripheral sovereign debts. That in turn had an impact on the risk premium of banks, but more generally on European names as a whole. During the whole period, US credit indices felt far less volatile and nervous than their European equivalent. And even though the market looked strong today on both sides of the Atlantic, the spread between the 5 year CDX IG series 22 and the 5 year iTraxx Main series 21 closed at almost 6bps today, when it was worth 3bps two weeks ago.