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The Week That Was

27 April 2018 by lberuti

The price action during the first part of the week was a follow through of what happened the week before. Credit indices widened consistently in a very orderly fashion. It all changed on Thursday, after the ECB press conference. Mr Draghi delivered a balance message and his language provided something for both the hawkish (solid growth, confidence in inflation medium term trajectory) and the dovish (concerns over recent economic performance and growing global protectionism). But what caught investors’ attention was his assertion that discussions about possible monetary policy changes for the June meeting had not started yet. They interpreted it as a suggestion that the ECB is not in a hurry to take another step towards normalisation. That eased the pressure on rates, and encouraged people to take some of their credit hedges off. In the end it was a week for nothing on indices, but there is still a nagging bid for single reference CDS as corporate bonds are feeling the effects of a busy new issue pipeline. Credit indices got richer when compared to their fair values.