EU Close

iTraxx has closed -1/-6 tighter ending the week -2.8/-12 - Main lagging cash's rally - continuing this years trend that' should hopefully be a tailwind for basis to move higher/positive. €IG had rallied -3.8bps WTD led by fins (-5) & was pointing to a strong session to end the week. Again broad based with exception of German bank curves, Hamburg, PBB & Aareal. Primary saw Friday activity with 3 issuers pricing €1.75b, demand still robust with books covered ~4* & pricing tight to secondary. No clear direction from $IG is more muted unch to tighter.

Belly bunds/swaps end the week +5/+2 higher - bunds underperforming as swap spreads continued tighter - we've seen mixed (& sparse) views on local swap spreads - compares with a more consensus skew in $ analyst views for widening (which is yet to play out). Flattening in rates curve this week, as expected on a sell-off, while the spread curve continued to trade flat.

€IG equity basket ended the week +1.2%, financials (+1.3%) vs. (tech -1.6%) helping credit eqv's outperform broader equity indices. Biggest gains were from Consumer cyclicals driven by VF (+11%), Wesfarmers (+8.6%) & Tapestry (+8.4%) but move extended to Auto's & lux retailers. Mixed move from F&B names but net drag including from falls in Heineken & Asahi - a move which seems To have been mirrored in retail vs. F&B spread performance. PBB with a -16% fall over the week mirrors credit as the top underperformer in the index.