17 March 2016 by lberuti
The consolidation that took place over the last couple of days appears to be over, and the main themes that were at play just after the ECB meeting made a stunning comeback. The performance of credit compared with equities was outstanding. The Eurotsoxx was down 0.7% (notably hurt by a rising) while iTraxx Main (ITXEB) was more than 6bps tighter at 71.25bps. Investment grade credits also outperformed their high yield counterparts. The tightening of credit comes from the recent ECB’s actions and from yesterday’s FED statement (which pushed the CDXIG 8bps tighter at 83.5bps in the US), but unwinds of hedges before the roll that will take place next Monday certainly played a part as well. The new series of the different indices will be cleaner both in Europe and in the US, both in investment grade and in high yield. Their risk premia will be tighter than current series despite the maturity extension, and hedgers could find it difficult to resist the urge to reach for protection.