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Technicals Or Fundamentals?

18 September 2015 by lberuti

If you ask any participant in the credit market, they will unanimously say that today was a very robust session compared with other asset classes. While the EuroStoxx closed 2.5% lower on the day, iTraxx Main was only 2bps wider at 71.1bps, and iTraxx Crossover was 8bps wider at 324.25bps. Some will argue that credit is to a large extent immune to the currency moves that affected equities. With people now pricing a long delay in any potential FED hike, the euro was up more than 1% overnight which probably contributed to European equity weakness. But another reason is the coming roll into the next series of indices which will take place on Monday. Series 24 will be issued in Europe and Asia (except Japan which is closed and will roll on the 24th) and series 25 will be issued in the US. Barring any sensational news, people are always reluctant to buy protection ahead of the roll and liquidity was relatively thin. Hedgers were not particularly keen to lift the current series and seemed happy to wait for the new ones on Monday. On the back of these technical, people are bracing themselves for a choppy open on Monday.