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Oil-Watching, Anyone ?

14 March 2017 by lberuti

We will know the decision of the FOMC tomorrow night, but this does not seem to be the main driver for risky assets at the moment, as the rate announcement seems anything but certain. It impacts risk appetite though, and positions appear fairly limited into the FED meeting. With interest rates taking a back seat, investors have had time to pay attention to some of their old favourites, and oil was back on everybody’s radar screens. It traded through $48 a barrel today as Saudi Arabia disclosed an increase in production. It has lost more than 15% since the beginning of 2017, and more than 10% over the last week only. Oil’s drop interrupted the calm that has gripped the market ahead of central banks’ decision – ECB met last Thursday -, and elections throughout Europe which starts tomorrow with general election in the Netherlands. The credit market was on the back foot, and the energy sector was the most impacted, particularly High Yield names in the US. CDX HY closed 7.5bps wider at 344bps and iTraxx Crossover 4bps wider at 291bps, while CDX IG closed 1bp wider at 66.5bps and iTraxx Main 1.5bps wider at 74bps.