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Derail Me If You Can

01 December 2017 by lberuti

The credit market was surprisingly firm throughout the morning. It seemed that the traditional relationship with equities had completely broken down, and despite the weakness of the Eurostoxx and of broader risky assets markets, iTraxx Main (ITXEB) reached new tights at 47bps. Early afternoon, ITXEB was effectively trading at levels not seen since early November 2007. The open of the US all but confirmed the positive tone, and the Great Financial Crisis seemed a very distant memory, while the great volatility repression organised by the different central banks is a fact obvious to every market observer. Credit was set to begin December like it ended November, but then news that Mr Flynn, Mr Trump’s formal national security adviser, had pleaded guilty to lying to federal agents and said Mr Trump’s team directed talks with Russia before they entered the White House. It created a wobble and ITXEB briefly jumped to 50bps, but protection sellers very rapidly showed up and it settled at 48.5bps. In the end, it was not as bullish a start to the month as it could have been, but it will take a lot to derail the credit market in the run up to Christmas.