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Is It Just Oil?

25 July 2016 by lberuti

It really felt like summer in the morning. Not that the weather was particularly sunny and extremely hot, but activity was subdued and risk premia were a tad tighter compared with last week’s close. In the afternoon, there was a nice bit of weakness though as the US came in. Oil sold off more than $1 which led the energy heavy CDXIG to widen in a straight line. As a result, iTraxx Main (ITXEB) was dragged wider but the move was gradual and ITXEB proved fairly resilient in the end. At the European close, at 68bps, ITXEB stood 5bps tighter than CDXIG which was trading at 73bps. That is a 2bps outperformance. But if you look a bit further, the run is more impressive: a month ago after the shock result of the referendum which pointed to Brexit, ITXEB was trading 8bps wider than CDXIG. In just 4 weeks, CDXIG has underperformed ITXEB by 13bps.