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America Receives Kudos From Europe

23 December 2014 by lberuti

Today’s statistics confirmed the positive trajectory of the US economy, which has been growing in the third quarter at a pace often associated with emerging markets. The release were greeted with new record highs on US equities, but credit indices appear to be stuck around current levels, 65bps for CDX IG and 350bps for CDX HY. The energy sector is still weighting on them (overnight, S&P made a number of changes in the oilfield sector on the back of expected drop in capex which will reduce revenues and margins in the sector), despite the recent stabilisation of oil prices. In Europe, the American economy received kudos from all asset classes, including iTraxx Main and Crossover, which saw their risk premia fell in a vacuum. They are closing on their tightest levels, and American credit indices are now trading resolutely wider than their Euro equivalents, with CDXIG (65bps) now 6.5bps on top of iTraxx Main (58.5bps). This trend seems poised to continue as, in Europe, no one is currently willing to fight the ECB. Accordingly, investors will be able to enjoy their Christmas, unless the results of the Greek elections in a few days eventually spoil the party…