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Are Financials Tired?

03 March 2015 by lberuti

Core banks risk premia have been widening for a few days, or at least they failed to participate in any meaningful way in the last part of the rally. Today, the peripherals were a bit under pressure, and the chronically positive bases (the risk premium of financial indices is wider than their theoretical risk premium) are providing single name CDS with a persistent bid. There was no specific piece of news (the situation affecting Heta, the Austrian bank, is too specific to impact other name at the moment), but as it looked as if that compartment of the market is feeling a bit tired currently. It is tempting to say that we could be at the beginning of a position-led selloff, but the backdrop for credit in Europe remains strong and makes it a tough call, especially with the ECB meeting on Thursday and the expected official launch of QE.