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Watching the Sky

14 August 2017 by pdonnat

We could enjoy the peak of the Perseids meteor shower last Saturday night. The show in the night sky has eventually let cooler heads prevail. The credit indices market was much less active today than last week. The reported traded volumes are down 50% and 60% respectively in Europe and in the US compared to the peak of activity last week. The volumes are still healthy for a mid-August Monday. The credit index market can be slightly disconnected this week from other markets due to the option expiry next Wednesday. The repricing of the spot has activated a lot of gamma which could pin the market.
Meanwhile, Fiat Chrysler CDS traded 16 bps tighter on rumors that the company could reshuffle its various brands and potentially could merge with a Chinese automaker. The same day, the European Commission announced that it aims to strengthen its power to limit the Chinese takeovers on strategic companies. The Fiat 500 is surely iconic less strategic. But the car industry is at the eve of the electric revolution. Auto companies are strategic. The Commission must rush.