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Buy The Rumour Sell The News

03 February 2015 by lberuti

Risk premia of companies within the basic materials sector have been under a lots of pressure recently. They have all widened meaningfully since September and most, like MTNA (ArcelorMittal SA), actually gapped wider over the last few sessions. Unsurprisingly, rating agencies have been monitoring this industry recently. S&P is currently reviewing Metals & Miners, and today they begun with Europe, downgrading MTNA from BB+ to BB. But that move had been largely anticipated as the factors which contributed to the rating downgrade were well known. In fact, if anything, S&P’s EBITDA forecast surprised the market on the upside. Investors decided then to focus on the stable outlook, and considered that a BB rating was already largely priced in. It ensued a spell of profit taking from those who had accumulated short risk positions on the name, and MTNA’s 5 year CDS closed 31bps tighter at 324bps.