Our Experts Comment the Times Series

See All the Comments

Game On For IG/HY Decompression

05 September 2016 by lberuti

Activity was predictably subdued with the US enjoying a 3-day week-end. Investors had one eye on the ECB meeting on Thursday though. Some uneasy short risk positions were unwound, and the credit market outperformed equities, in a reversal of the recent pattern. The investment grade space led the way, driven by Financials with some accounts reducing short risk positions in a rather illiquid market. Some reckon an extension of QE could take the form of a relaxation of the capital key which would be very supportive for Italian government bonds, easing recent concerns about the Italian banking system. Some even suspect that bonds of financial institutions could become eligible. These expectations might be a bit far-fetched, but they were certainly enough for iTraxx Financials Senior and Subordinated to outperform iTraxx Main, which in turn outperform iTraxx Crossover.