12 June 2015 by lberuti
Earlier in the week MTNLN (Matalan) reported their FY15 results. They were in line with earlier guidance, but were however overshadowed by the announcement of the material impact from execution issues associated with the transition to their new distribution centre in Liverpool. That first sent MTNLN’s 5 year risk 50bps wider to 510bps. Since then, credit indices have been bouncing around with contradicting headlines regarding Greece and the market has been bracing itself for a return to a positive basis environment on iTraxx Crossover, after a few months of chronic negative basis (which probably had something to do with yield hungry investors in a zero interest rate world). That means that when arbitragers will show up, they are now more likely to ask for offers of protection on MTNLN, when they had consistantly been selling since last October. So dealers tried to figure out where the natural offer level is. At the close, they were still looking for it, despite a 56bps widening of MTNLN’s risk premium.