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Another Day, Another Rip

10 September 2018 by lberuti

Once again credit indices produced another impressive performance today. With the exception of CDXEM which tracks emerging markets’ sovereigns, all indices closed tighter (iTraxx Main -3.5bps @ 61bps; iTraxx Fin Snr -5.5bps @ 71bps; iTraxx Crossover -8bps @ 280bps; CDXIG -2bps @ 58bps; CDXHY -6bps @ 326bps). Everything Italian was pushed tighter by the BTP’s rally (-13bps @ 2.91%) which followed the declaration on Sunday by Finance Minister Giovanni Tria that the Italian government knows it must cut its debt load and keep the budget deficit in check in order to promote growth and gradually implement its spending program. “It makes no sense to seek two or three billion euros of extra deficit if we then have to pay three or four billion more due to higher yield” on government bonds, he said. But the outperformance was not due to Italy alone. UK names also joined the party after European Union chief Brexit negotiator Michel Barnier struck an optimist tone as he said a deal on the UK’s orderly withdrawal from the bloc was possible within six to eight weeks. UK financials, which have had a bumpy ride over the last fortnight, extended Friday’s gains and were the best performers in their sector.