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Head Off for Bastille Day

14 July 2017 by pdonnat

The over performance of European credit over its US equivalent was heading off its path today. The iTraxx Europe index is closing a touch wider while its US equivalent is closing stronger. The traded volumes reported on the various SDR were very low. The European credit indices coming off into the close was due to the lacklustre activity but it was also due to some iTraxx financial index consolidation. At 50bps, the risk reward on European banks and insurance companies could see more profit taking going forward. However, the single names did not follow through, hardly moving wider.
The squeeze in CDS can be stopped by the cash supply. The concession to CDS that Hema BV gave today was more than 200bps pushing the CDS 40bps wider. More issuance and refinancing could bring the CDS market more in line with the price of risks.