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Late Winter or Early Spring

26 February 2018 by pdonnat

With western Europe freezing with polar air mass from Moscow, the winter is far from over. With Italy going to the polls next Sunday, the market could see another cooling weather from Roma. Italy is divide while facing many challenges. Italy credit default swap (CDS) has the largest single name open interest among single name CDS (visit OTCStreaming ). With more than 17BUSD open interest on the Isda 2014 contract, increasing by 500MUSD over the last week, more than a billion traded last week. The CDS premium is rising since the beginning of the month but it is only 10bps wider, trading in the 105-110 context. Investors are starting the week by adding risk on Italy bonds. The CDS is trading better, in line with other risky assets. The size of the open interest on the CDS could favor a short squeeze on the name, hedgers will be most likely quicker to act than long term investors. The next week-end could deliver an early spring for the CDS market.