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BESPL The Only Focus

11 July 2014 by HCM

There was only one topic in the market this week: the Espirito Santo saga and its implications for the different entities of the group, for their creditors, and what does it tell us about a possible end of the crisis. Every entities which have a link with Espirito Santo got punished (PORTEL’s 5 year risk premium ended the week 40bps wider and BESPL’s 110bps wider), but there were also collateral damages. Confidence in financial entities was shaken and their ability to exit the crisis unscathed was questioned. The convergence trade between iTraxx Main (ITXEB21) and iTraxx Financials (ITXES21) which everybody loved a fortnight ago did not look so appealing any longer and people rushed for the exit. From trading flat to each other, iTraxx Main and iTraxx Financials closed the session 10bps apart, which is the widest we have seen in a while.