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The Tantrum Is Over

11 March 2016 by lberuti

After reacting like a spoiled kid yesterday, the equity market rose steadily today and finished the day up 3% across Europe, more than making up for Thursday’s losses. As far as it was concerned, the credit market never looked back and followed the strong positive trend which was initiated yesterday, only with increased velocity. One has really to go back to the heyday of the Great Financial Crisis to find equivalent daily variations. Days where we have seen a 20% tightening of the risk premium of iTraxx Main (ITXEB) have been few and far between in the 12 year history of credit indices. Since February 11th, the risk premium of ITXEB has been roughly halved, moving from 126bps to 68bps. Investment grade benefitted the most from the move, once again outperforming iTraxx Crossover. Unsurprisingly, European credit also significantly outperformed US credit, and ITXEB closed today 16bps tighter than CDXIG which ended the session at 84bps, when the spread between the 2 was 9bps yesterday and 0 early February.