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Financial Blues

10 January 2017 by lberuti

The new issue calendar has already been busy so far in 2017. The financial sector has seen its fair share of new deals, brought by banks and insurers alike. Today for instance, Axa SA and NN Group NV each issued more than $1Bln subordinated bonds, while Mediobanca Spa and BPCE also tapped the market. That steady flow of new bonds has weighted somewhat on existing deals and given a bid to single reference CDS, with protection on French banks particularly in demand. On their side, UK names were not helped by recent Brexit discussions. That all contributed to make the financial sector one of the underperformers of the last few sessions, and it pushed iTraxx Financial Senior basis further into negative territory (the index risk premium is tighter than its theoretical risk premium) Meanwhile, the broader credit market started the day on a weak note with iTraxx Main (ITXEB) and iTraxx Crossover rapidly reaching 70bps and 295bps. They never managed to break these levels decisively though - positive gamma kicking in (particularly on ITXEB) was enough to keep them in check -, and credit indices spent the afternoon grinding back to unchanged levels across the board.