Our Experts Comment the Times Series

See All the Comments

Get Used To It!

16 June 2016 by lberuti

If you look at the daily variations, you will probably wonder what the fuss was all about in creditland. But if we had closed 2 hours earlier, the picture would have been totally different. The session had been completely one sided thus far, and investors were relentlessly buying protection on iTraxx Crossover (ITXEX), iTraxx Main (ITXEB) and iTraxx Financials Senior (ITXES). Protection buying on single names was more discriminating, particularly in the financial sector. Peripheral names appeared to be under particular pressure, together with the UK institutions. So it seems that investors are beginning to price in the possible second round effect of Brexit and possible contagion risks. All the protection buying came to halt a couple of hours before the close though, and risk premia went very rapidly to unchanged levels on the day. It means that the total variation of ITXEB on the day was almost 10bps (88-92-86.5) and the total variation of ITXEX was 35bps (374-394-379). At least until the end of the month, you have better get used to intraday volatility. It is not going anywhere any time soon.