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If You Thought It Was Over

16 March 2015 by lberuti

Some old themes have come back to haunt the market recently. Currencies swings have of course been at the forefront of investors’ preoccupations and they probably go a long way in explaining the diverging paths of Euro and US risky assets. But Oil prices have also resumed their downward trajectory. They are down more than 15% since the beginning of the month, and that has not gone unnoticed in credit markets. The red colour painted all over the energy sector on the above grapple in the US is proof that it has underperformed other compartments of the credit market over the last week. While the risk premia of American companies have traded sideways across the board, the average risk premium of energy companies has increased by 10%, widening 20bps to 211.5bps. This is made all the more obvious by the size of box dedicated to this sector, which also indicates it was one of the busiest in terms of trading activity.