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12 January 2017 by pdonnat

We learnt yesterday that VW ( Volkswagen AG ) has reached a second settlement (worth $4.3Bln) with US authorities by pleading guilty to using false statements to import cars to the US. It should help the brand put the diesel emission cheating scandal behind it in the US, but the Dieselgate is by no mean over, and more automakers could be on the hook. Towards the end of the afternoon, the Environmental Protection Agency (EPA) accused FIAT ( Fiat Chrysler Automobiles ) of using emission cheating softwares in more than 104,000 diesel vehicles sold between 2014 and 2016. Even though the company denied implementing such “defeat” devices, FCA’s stock plummeted 16% and its 5-year risk premium traded all the way up to 330bps before settling at 313bps, still 36bps wider on the day. It was today’s worst performer by a fair margin, and it dragged the whole auto sector wider. Meanwhile, the broader credit market proved very sticky around 66bps on CDXIG, 70bps on iTraxx Main and 290 on iTraxx Crossover during the whole session. It waited until the final hour of European trading to finally move away from these levels, when the EPA news was used as an excuse to push risk premia wider across the board. The move was limited to 1.5bps on CDXIG and ITXEB and 6bps on ITXEX though, and half of it was even erased before the closing bell.