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Why Fix It If It’s Not Broken?

22 October 2014 by lberuti

Today risky assets stabilised after the remarkable turnaround which took place over the last few sessions. Since central bankers started to speak last week, all indices have seen their risk premia decrease by roughly 20% across the board. After the ECB was said to consider bringing corporate bonds purchase to the agenda of their December meeting, the rally monkey was out in full force yesterday. Even though ECB sources later said that preparations for buying debt had not intensified recently, there was no outright denial either, which explains why the credit market (like most other markets) has been in no hurry to pare back its recent gains. Credit indices have not completely put behind them the early October mini drama though. European debt problems are now back in people’s mind, and iTraxx Main is now trading a couple of basis points wider that CDX IG when it was trading a couple of basis points tighter at the end of September.