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Strong As ABull

24 March 2014 by HCM

We already mentioned that the roll took place last Thursday. The 5 year risk premia shown in DataGrapple are today 3 months longer than they were a week ago. As a rule of thumb, this 3-month-extension is worth 5% of a risk premium. So one would reasonably expect them to be a least a tad wider than they were on the 17th March. But with the exception of the High Yield space in the US (where risk premia are 5bps or only 1% wider, which still implies a tightening on a constant maturity basis), other sectors are flat or even tighter. The outperformer is the High Yield universe in Europe (aka CrossOver) where 5 year risk premia are actually tighter. On average this space is 4bps tighter, which means an effective 6% reduction of risk premia. At the moment, each tentative move wider is met by a steady stream of protection selling. This market is strong as a bull.