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Citi See Several Factors Behind European Bank CDS Move

CROSS ASSET
On today's sizeable move in CDS spreads across European banks, Citi write that the factors behind the move are:
  • A reaction to the significant rally back post the CS solution and the weakness of the prior week
  • A general risk aversion given the issues in the US banking market noting that Yellen had to tweak her language within 24h on potentially providing further assistance to depositors
  • The cash-CDS basis (as CDS is generally a cheap hedge than cash)
  • Potential counterparty hedging needs
  • Relatively thin volumes
  • We are heading into the weekend (given what has happened over the last 2 weekends)

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