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08 February 2016 by lberuti

With oil trading once again towards the lows, one would expect the energy heavy CDXIG – the US investment grade credit benchmark – to keep underperforming iTraxx Main (ITXEB), its European equivalent. In fact, the opposite happened and the reason lies with Financials. CDXIG does not include any banks, while ITXEB contains twenty one. This subset has been hammered recently, pushing iTraxx Financials Senior, which also include 9 insurers, almost 30bps wider to 135.5bps over the last couple of sessions. Investors fear the low rate environment could take a heavy toll on the sector. On top of that, the latest Brexit YouGov poll published on Friday showed a significant rise in support for leaving the EU – the net lead of those saying they would vote to leave increased to +9% - and gave the UK banks’ risk premia another kick wider. The move has been so violent that ITXEB, which was trading 14bps tighter than CDXIG a couple of weeks ago, closed tonight 1bp wider than the US benchmark (122bps vs 121bps)