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Banking on Banks, not Central Banks

26 July 2018 by jbchevrel

Today we count multiple lenders among the Main’s best performers. That is mainly on the back of Markit's announcement regarding the future roll. For the upcoming Itraxx Europe Series s30, Danish and Spanish senior non-preferred reference obligations will be selected if available. Consequently, DANBNK is tighter -5.5bp, BBVA/SANTAN -6bp. Additionally, if Italian banks issue more Tier 3 paper (T3), their T3 could be included in the Mar19 roll (s30-s31). That helped BACRED to tighten -8bp, ISPIM -8.5bp, UCGIM -7bp. The Senior Financial index outperformed the Main even though the 10y BTP/DBR spread is +2bp wider on the day. Elsewhere it was a decently risk-on session which saw CDS and indices tighten, after the constructive Trump-Juncker meeting and what was probably the least eventful ECB meeting I can remember of. Next week the FOMC meeting may well be "as intense", while, for once, the focus may be more on the BOJ.