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Weak But Constructive?

29 September 2015 by lberuti

Credit indices are stuck at their widest levels of year, and in fact at their widest levels of the last couple of years. Following a very heavy session in Asia, where indices, which include a fair number of commodity related companies, had a poor session and saw their risk premia closed 10 to 15% wider (iTraxx Asia Ex Japan +15bps at 167bps; iTraxx Japan +8.5bps at 83bps; iTraxx Australia +8.5bps at 140bps), iTraxx Main (ITXEB) and iTraxx Crossover (ITXEX) headed towards 95bps and 395bps in a few prints. But they rapidly got back to unchanged with early profit takers from the real money space. Despite the equity volatility, ITXEB could not reach its initial wides again, and only managed to trade back up to 94 later in the morning, and then 93 in the afternoon with US accounts apparently better sellers of protection. Credit indices eventually closed unchanged across the board in Europe and in the US, which is somewhat in line with equities. At the close, the mood certainly appeared more upbeat, and some could call it cautiously constructive. The next few days will tell us whether GLEINT, VW and the likes have finally find a floor, or if we are merely witnessing some end of quarter damage limitation exercise.