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Shoud I Stay Or Should I Go Now?

05 May 2016 by lberuti

As you can see with the pale shades of the above grapple, it was a fairly dull day with most of Continental Europe out. A few names are flashing red though, and most of them are in the top right corner where the Energy and Basic Materials sectors can be found. Indeed, WFT ( Weatherford International Plc ) reported a larger than expected first quarter loss and lowered their free cash flow guidance for the year. That comes at a time where most people holding short risk positions have capitulated and sold the protection they owned during the aggressive rally we have seen since the February wides. As a results, there are very few investors left willing to offer CDS, and whenever buyers show up, risk premia are marked wider very rapidly. This technical factors go a long way towards explaining why WFT’s 5 year CDS was marked 7pts wider today. They also explains investors’ unease with the tight risk premia across the energy sector at the moment. If you extend the time span to a week (click on the "1W" toggle above the grapple) in the above grapple, you will see a number of names flashing red in that top right corner. WFT was not the first company to give up some of its recent impressive gains.