European credit indices comfortably outperformed their equity counterparts, Monday, in a session where volumes were diminished by the Columbus Day holiday in the US. Spreads continued to feel downward pressure amid expectations that the next stage of quantitative easing is close to a formality, according to Markit Financial Information.
“An unsatisfactory outcome from the weekend IMF meeting had little impact on spreads. China categorically rejected criticisms of its exchange rate policy, instead highlighting the loose monetary policy of the US. But the prospect of a currency war and beggar-thy-neighbour policies has less resonance with investors than the FED’s liquidity pump, though this may well change if the rhetoric becomes more aggressive.” vice president Gavan Nolan at Markit Credit Research writes in his daily alert.
A weaker than forecast non-farm payrolls report on Friday – not normally a catalyst for spread tightening – only served to firm up the consensus that the Federal Reserve will further expand its balance sheet before the end of the year.
The IMF was also at the centre of the main notable movement today.
Dominique Strauss-Kahn, the IMF managing director, says that the agency might be willing to extend its bailout loans to Greece beyond 2013.
Germany quickly issued a statement that made it quite clear that they would be unhappy with such an extension.
“The Greek bailout was unpopular with the prudent German public, and Chancellor Angela Merkel would probably be wary of granting Greece any more leeway,” Nolan notes.
Nonetheless, the news caused Greece’s spreads to tighten significantly and the sovereign market performed strongly throughout most of the day.
- Markit iTraxxEurope 97.75bp (-4), Markit iTraxx Crossover 454bp (-15)
- Markit iTraxx SovX Western Europe 141.5bp (-4.5)
- Markit iTraxx Senior Financials 119bp (-4.5)
- • Sovereigns – Greece 695bp (-25), Spain 208bp (-9), Portugal 383bp (-13), Italy 177bp (-7), Ireland 425bp (-5), Belgium 123bp (-1)
- BP 141bp (-1)
|LONDON MINING PLC||Basic Materials||160,995||600,862|
|TOM TAILOR HOLDING||Consumer Goods||24,350||339,454|
|CARL ZEISS MEDITEC||Health Care||26,852||327,594|
|A.G. BARR||Consumer Goods||20,377||278,735|
Top 10 ETF
|DJ STOXX 600 OPTIMISED BANKS SOURCE ETF||1,484,920||105,929,455|
|DJ STOXX 600 OPTIMISED BASIC RESOURCES SOURCE ETF||128,244||41,939,958|
|LYXOR INTL ASSET MANAGEMENT ETF EUR MTS7-10Y EUR NPV||209,089||25,894,724|
|DB X-TRACKERS – DJ STOXX 600 BASIC RESOURCES ETF||236,205||21,739,561|
|DB X TRACKERS – DJ EURO STOXX 50 ETF||683,510||19,329,663|
|DB X TRACKERS – MSCI EMERGING MARKET TRN INDEX ETF||621,630||18,367,500|
|DJ STOXX 600 OPTIMISED INDUSTRIAL GOODS & SERVICES SOURCE ETF||151,966||16,723,243|
|DB X-TRACKERS ETF DJES50 1C EUR NPV||500,000||14,965,000|
|DB X-TRACKERS II ITRAXX CROSSOVER 5-YR TOTAL RETURN INDEX ETF||104,567||12,241,136|
|DJ STOXX 600 OPTIMISED CONSTRUCTION & MATERIALS SOURCE ETF||62,001||9,855,144|
Top 10 Trades
|BANCO POPULAR ESPANOL||Financials||6,500,000||30,225,001|
|SNAM RETE GAS||Oil & Gas||5,461,000||20,383,183|
|Name||Sector||Volume||Volume (T-1)||% Change|
|BANCO POPULAR ESPANOL||Financials||13,864,888||1,397,678||892%|
|HIKMA PHARMACEUTICALS||Health Care||3,769,365||1,350,926||179%|
|SNAM RETE GAS||Oil & Gas||31,393,314||21,017,338||49%|
- Greece Leads Drop in Sovereign Debt Risk as IMF May Extend Loan (businessweek.com)
- Supporting Greece, supporting Europe (ftalphaville.ft.com)
- Germany Opposes Extending Greek Repayment Schedule (businessweek.com)
- Greek CDS Spread Tightens as Default Fears Ease (blogs.wsj.com)
- Investors Loving Greek Bonds Monday (blogs.wsj.com)
- Stocks, U.S. Futures Gain on Stimulus Bets; Corn, Soybeans Rise (businessweek.com)