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Backed By Volumes

08 February 2017 by lberuti

This morning, DTCC published their volume statistics for the week that ended last Friday. They showed that clients have been busy during these five sessions. They have expressed en masse some macro views, which point towards extreme caution about Europe. On the most recent series of credit indices, while they increased their exposure to investment grade credit in the US and sold a further $2.9Bln of CDXIG – clients are now long risk for almost $44Bln on CDXIG27 -, they bought back $6.5bln of protection on iTraxx Main (ITXEB). That is one of the most aggressive weekly exposure reduction we have seen since DTCC began keeping records in 2011. It represents a reduction of 30% of clients' net position - they are still long risk via ITXEB26, but for $15.4Bln only -. Concerns about Italy and France, and more generally about political risk in Europe, were front and centre and drove the spread between ITXEB and CDXIG to 11bps, the widest level it has been since early 2016 – except that back then, CDXIG was the widest of the two as it suffered from its energy heavy composition -. Towards the close, we had a glimpse of how fast things could unravel though. A magazine reported that ECB President Mario Draghi said at an internal ECB dinner that he sees the central bank maintaining an accommodative stance until the end of his mandate in October 2019. That was enough to send ITXEB 0.5bps tighter at 75.5bps while CDXIG closed 1.5bps wider at 66.5bps.