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The Return Of Alpha?

02 November 2017 by lberuti

Over the last few weeks, the difference between the behavior of US and Euro risk premia has been quite striking. Since the beginning of the reporting season, any attempt at widening of any risk premium of any European name following disappointing results has been met by a wall of protection selling interests. The "Draghi put" is driving investors to believe there will always be a buyer of last resort - the ECB - to bail them out of any dodgy position. By contrast, many US names have been put under severe pressure after their earnings fell short of investors' expectations. The dispersion is steadily increasing among the performance of US credit indices constituents, and it begins to be reflected in index bases. While the basis of iTraxx Crossover has been kept firmly in check in Europe , it begins to open up in CDX High Yield in the US.