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Is That What It Takes?

02 February 2018 by lberuti

Today was the first “risk-off” session of the year in credit default swaps, with some genuine interest to buy protection. While investors were looking to buy CDS across the board in the US, they focused on the higher beta names in Europe. In fact, the risk premia of most European investment grade companies hardly moved. There was one exception though. Following press comments, VOD ( Vodafone Group plc ) confirmed that they are in early talks with Liberty Global Plc about potentially acquiring some of the cable operator’s European assets, where the companies’ businesses overlap. The two corporates have been discussing their European businesses for years, and even considered a merger at some stage but scrapped the idea in 2015 after failing to agree on a price. While investors acknowledge the potential benefit of such a transaction and sent VOD’s stock 2.5% higher at the close, they also expressed caution regarding the impact on the company’s balance sheet and pushed VOD’s 5-year risk premium 5bps wider at 61bps. Such has been the absence of volatility so far this year that it was enough to get everybody excited…