Markit Recap – 11/12/2018

When market makers start sending runs based on nation states rather than sectors it may be a harbinger of fundamental change in how European credit is traded. That is precisely what we are seeing as the Brexit process descended into chaos. A number of UK cabinet members have resigned in protest at Theresa May’s draft

Markit Recap – 10/22/2018

Mario Draghi, in a press conference confirming that market rate expectations were intact, stated that the risks to the eurozone’s economy are “broadly balanced”. His view may have merit, but there is little doubt that the situation is looking more precarious than a few weeks ago. If negative sentiment does permeate the market and spark

Markit Recap – 10/8/2018

Credit market veterans are all too aware that the determination of CDS credit events is far from straightforward. This can be seen as a weakness of the product, but it is difficult to avoid given the irregularity of bond contracts and the smorgasbord of insolvency laws across different jurisduictions. The case of Astaldi is a

Markit Recap – 10/1/2018

We noted last week that the markets may be guilty of complacency on Italy’s budget, and so it proved. As mooted in the initial spending plan, an increase in the budget deficit to 2.4% was proposed by the government, significantly higher than the 2% limit specified by the European Commission. This was tempered by the

Markit Recap – 9/24/2018

  The appeal of populist, often nativist agenda to electorates disgruntled with economic stagnation and rapid demographic change has been underestimated in recent years, not least by bond markets. Nonetheless, the performance of Italy’s credit spreads over the summer suggests investors are reluctant to wholly embrace political risk aversion....

Markit Recap – 9/10/2018

  It’s the 10th anniversary of Lehman’s collapse and we are being inundated with retrospectives and predictions of what will cause the next crisis. Many are pointing towards emerging markets as a likely catalyst, a logical conjecture given the tightening in monetary policy that is underway in the US....

Markit Recap – 8/13/2018

  Turkey’s self-inflicted problems have had ramifications well beyond its borders and led to comparisons with previous emerging market crises. Mexico in 1994; south-east Asia in 1997; Russia in 1998; Argentina in 2001: all have been invoked as precursors to Turkey’s seemingly inevitable descent into debt distress and recession....

Markit Recap – 8/6/2018

Emerging markets: CDS stalwarts Emerging market sovereigns are regarded as stalwarts of the CDS market. Liquidity is dependable – participants can usually trade in large size with relatively low transaction costs and little price impact. Those that offer doom-laden predictions about the single name product clearly pay little heed to emerging market names....

Markit Recap – 7/16/2018

The news wires are full of headlines around Trump, trade wars and Brexit. A mercantilist USA and a UK government clinging on by its fingertips are not conducive to positive market sentiment. Yet spreads appear unaffected by the political chaos; spreads have tightened, rather than widened. The Markit iTraxx Europe is trading at 65bps, a

Markit Recap – 7/2/2018

It’s not uncommon for a firm to have an association with an adjective. The description is often derogatory; for example, acquisitive companies are often said to be rapacious. For Glencore, the commonly used adjective is “secretive”. This is no doubt due to the deliberately low profile of its CEO, Ivan Glasenberg, as well as its