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Is It Boldness Or Caution?

01 June 2016 by lberuti

Today was mainly a continuation of yesterday’s session, as a couple of hours were not enough for the market to digest the perceived increase of Brexit probability. Credit indices closed off their widest levels, but they all ended the day weaker and the bid for protection felt relatively deep as flows somewhat picked up compared with yesterday. It is a bold call to go short risk in Europe right into the face of the CSPP (the ECB should give details of the programme on Thursday), but it could actually just be caution. DTCC published their weekly statistics regarding client positioning as of last Friday. They showed that buy side institutions had increased long risk positions on iTraxx Main by $1.4bln, on iTraxx Crossover by $0.6bln. They also cut their short risk positions in iTraxx Financials Senior $1.0bln. Rather than doubting Mr Draghi, maybe people are just trimming consensual CSPP long risk positions after all.