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Everybody To The Left... And Everybody To The Right

10 June 2016 by lberuti

It has been coming for a few days. Since the beginning of the week, the risk premia of individual companies had been supported by the imminency of the CSPP and then its official launch. The ECB made a bold statement as they apparently begun by buying bonds at the lower end of the allowed rating spectrum. At the same time, Brexit came back into focus, as a victory of the “leave” now seems a distinct possibility in the UK referendum. That certainly put pressure on credit indices. But today everything succumbed to the weak macro risk sentiment. Credit indices and their theoretical values alike took a leg wider (following equities with Eurostoxx down 2.8% the day) which brought most risk premia to the wider end of their recent range, while they were at the tight end hardly more than a week ago. S&P wobble… ECB credibility challenge… FED hawk speak… and we can easily imagine ourselves in a world of pain.