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It’s Thursday, It’s Mario Day

21 January 2016 by lberuti

Positive sessions for risky assets have been few and far between since the beginning of the year, and none produced any meaningful relief rally until today. Credit indices did not move much initially, but while single name protection still had a nagging bid despite CDXIG closing 3bps tighter compared with its level at the European close, both iTraxx Main (ITXEB) and iTraxx Crossover (ITXEX) felt offered. The move tighter began after the ECB announced they decided to leave rates unchanged, and it gained traction once Mr Draghi begun his press conference. His dovish comments regarding a possible review of the ECB’s QE program which could happen as soon as March 16, combined with an improving news flow on financials with Italy expecting to reach an agreement with the EU over a bad loan vehicle and a rebound in oil price towards $30 per barrel, all contributed to a sharp rally into the close. All credit indices ended the session at their tightest levels, ITXEX at 378bps (-20bps), ITXEB at 94.5bps (-5bps) and CDXIG at 106bps (-8bps). Needless to say that single entity CDS were somewhat left behind (maybe they will catch up tomorrow?) and bases are still at historically stressed levels.