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What Are We Still Waiting For?

17 January 2017 by lberuti

Markets spent yesterday and this morning preparing themselves for Prime Minister Theresa May’s hotly anticipated Brexit speech. With the first hints that Mrs May would signal a hard Brexit given by the week-end press, some investors had been bracing themselves for potentially negative reactions and credit indices were pushed – moderately - wider until UK’s Prime Minister began speaking. Breaching 70bps on iTraxx Main (ITXEB) proved a struggle – it reached 70.5bps at the widest - and we did not learnt an awful lot during Mrs may’s speech compared to what had already been leaked. Brexit means Brexit and the plan is to exit the single market while looking for a “bold and comprehensive” free trade agreement giving the best possible access to… the single market. Other EU countries always viewed the two years following the trigger of article 50 as a period to discuss the divorce settlement while the trading relationship would only be worked out afterwards, making a transitional deal difficult to achieve. But unlike the FX market – which was also rocked by Mr Trump’s declaration that the USD is “too strong” -, the credit market was keen not to challenge the status quo and ITXEB only closed 0.5bps wider than Friday at 69.5bps.