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They Are Junk No More

18 September 2017 by lberuti

For once it was a quiet week-end in terms of headlines. There was no missile launch nor any tornado hitting the US shores. We saw last week how easily investors brushed aside worrying headlines, and this morning it seemed that no news was good news. Without any specific catalyst, the tone was firm in the market from the word “go” and risky assets traded positively across the board. Credit was further helped by S&P’s upgrade of Portugal to BBB- from BB+. The outlook is stable, and the action ends Portugal’s spell among junk rated credits which started in January 2012. The yield of 10-year Portuguese government bonds was 35bps lower at 2.4% and Portugal’s 5-year risk premium was 13bps tighter at 133bps. It lifted peripheries’ spirit, and prompted some outperformance among financials. It triggered some short covering, particularly on BCPPL (Banco Comercial Portugues) which saw its 5-year CDS tightened 31bps to 189bps.