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Sell The Rumour, Buy The Fact

01 August 2016 by lberuti

After the results of the European banks stress tests on Friday, many expected a bullish price action on the financial sector. And it is what we actually got first thing this morning. But as the morning wore on, profit takers soon showed up in the market and flows became fairly balanced. After their initial tightening, banks’ risk premia soon stabilised and they eventually closed off their tightest levels across the board. If almost all the banks showed resilience in the stress test adverse scenario, some investors see execution risks in MONTE’s ( Banca Monte dei Paschi ) right issue. In addition, MONTE has now created a precedent setting a price of its NPL portfolio at 33cts on the euro under the terms of the bail out. Other Italian banks with large NPL books, most notably UCGIM ( UniCredit SpA ), could announce they have further write-downs to take on these already depressed assets.