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The Week That Was

18 November 2016 by lberuti

The market direction in Bunds has been comparatively stable recently, but the movement in periphery yields have remained especially volatile, at levels not seen since the aftermath of the Brexit vote. BTPs – Italian Treasury Bonds – have remained at the epicentre in terms of relative moves in both directions over the past week, though mainly to the downside. The clear reason for this is the increasing proximity to the Italian referendum on constitutional reforms, which will be held on December 4th. Today was no exception, and an early widening in BTPs and OATs – French government bonds – led to further underperformance of peripheral credits. The valuation-based sell-off of corporate cash continued given that the entire investment grade corporate market trades insides treasury yield. Tight corporate cash was particularly affected, dragging associated CDS wider. Today and for most of the week, flows from investors were focused on better buying of protection.