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A Bad Day If You Owned Bad Loans

28 January 2016 by lberuti

It was another volatile day for oil with rumours of potential concerted cuts by Russia and Saudi Arabia which were later denied. At the end of the day, oil finished up almost $1 which benefitted energy names and made them the best performing sector among European credit. At the other end of the spectrum were financials. After the release of the Italian plan regarding non-performing loan, investors realised that unless transferring assets is mandatory and marks are severe (or maybe should we say fair…), then nothing really changes for the system. Bigger structural reforms will be needed to consider the issue over. On the back of that, the risk premia of Italian banks took a leg wider, dragging all financials with them. While the fair value of iTraxx Main was flat on the day at 104.3bps, the fair value of iTraxx Financial Senior was 2.3bps wider 93.1bps.