29 October 2020 by jbchevrel
We have had a fairly risk-off session in credit synthetics. iTraxx XOver widened by +30 on the day. French and German lockdowns look like they are increasingly priced in. We will have Macron’s speech at 1900 LT tonight. German Chancellor Merkel will impose the toughest restrictions since spring (closing bars and restaurants, one-month partial shutdown starting Monday, to keep most businesses operating). German government sought to ease pressure by making up to €10B fiscal support for companies affected by the measures. The government will be reimbursing 75% of lost sales for small companies, and 70% for bigger ones. The expectation is for less stringent measures than in spring. As far as the economy is concerned, people will work or work from home more easily, and the industrial/manufacturing sector will likely remain open for most of it. Schools probably remain open as well. Also key to watch any additional fiscal support announced by Macron tonight. Tomorrow the ECB may well add dovishness to the mix.