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Mixed Feelings

26 June 2018 by lberuti

It was a bizarre session in credit land. At the close, everybody had the feeling that it had been a weak day. Indeed, as the morning developed, a reasonably strong open turned into a broad-based widening of risk premia. Peripheral financials were put under severe pressure when Emerging Markets turned weak and some supply of Italian and Spanish government bonds hit the market. Around lunchtime, periphery was 20bps in subordinated and 5 to 10bps wider in senior. Credit indices were pushed towards their recent wides, iTraxx Main touched 75bps and iTraxx Crossover 320bps. Once it appeared that the government debt sales would be absorbed and would not derail the market, the widening ran out of steam and profit takers emerged on indices. They spent the afternoon trending back to unchanged or even tighter levels across the board, while the risk premia of single corporate were a tad stickier around their widest levels. These contrasting price actions pushed bases tighter on all credit indices.