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Bla Bla Land

01 March 2017 by lberuti

While Mr Trump’s speech has been hailed as “presidential” in tone, the least one can say is that it was light on policy details, with barely any clues on the “historic tax reform”. The President essentially returned to the subject of rebuilding infrastructure, highlighting that he will ask Congress to approve legislation that will produce a $1Tln investment financed by both public and private capital, guided by the now familiar principals of hire American and buy American. It looks as if the positive tone, which contrasted with the inauguration speech, was enough to convince investors to brush aside the hawkish comments made overnight by the Fed’s Dudley and Williams. The solid open in Europe shook the confidence of those holding bearish positions and triggered a wave of short capitulation. CTA, hedge funds and real money investors all rushed for the xit and kept hitting bids on protection until there was nothing left to hit. Credit indices closed tighter across the board (iTraxx Main at 71bps, iTraxx Crossover at 281.5bps, CDX HY at 305.5bps), and CDXIG even reached its tightest level since September 2014.