Halister News

(Bloomberg) -- Initial attempts by the market to take risk assets tighter this morning faded as concerns surrounding Deutsche Bank intensify with knock-on effects seen as Lufthansa and now NordLB pull deals, Bloomberg strategist Simon Ballard writes.

• Start of BOE’s Corporate Bond Purchase Scheme should provide some fillip for the asset class, even if the program has been well flagged since August and largely priced in to spreads

STATE OF PLAY (Tuesday 11.30am BST)

• Synthetic indexes edged tighter at open, but subsequently reversed gains to push wider on fragile market sentiment; iTraxx Europe currently 74.76 mid (+2.1ps) just off earlier session high of 75.20; Xover 337.91 mid (+5.2bps, 339.20)
• Financial protection trading wider to reflect concerns surrounding Deutsche Bank; iTraxx senior and sub indexes quoted +3.8bps and +8.1bps respectively
  • Deutsche Bank 1yr CDS is sharply wider (+19bps) at 198.52 at time of writing (from 146 on Friday)
• Secondary EUR cash indexes straddling unchanged on average; EUR IG index quoted this morning at 60.83bps -1.4bps, but EUR HY under pressure and +2.7bps at 350.07bps OAS
• GBP secondary cash outperforming slightly on back of BOE CBPS; GBP IG -0.5bps at 142.17 and GBP HY +1.0bps at 463.05bps
• Bloomberg Commodity Index seeing moderate weakness ($84.70, -0.2%) as oil prices lead sector lower on speculation of OPEC output deal; WTI -1.2% at $45.39, copper Dec 2016 futures -0.6% at $218.50; Silver Dec 2016 futures quoted -0.4% and gold at $1344.60 (-0.3%)
• EUR equity indexes trading negatively across all major bourses (-0.6% on average), with DAX the laggard (-0.9%) at time of writing
  • U.S. equity futures holding onto positive territory though, as Clinton’s perceived ’win’ in last night’s presidential debate is seen market supportive; U.S. corp bond mkt likely to be driven by Deutsche Bank sentiment at open later
• Cautious tone across risk assets also feeding modest haven bid for EUR govt bonds this morning; Obl/bund yields 2bp lower on average across the curve at time of writing
  • 5Y bund -0.59% (-2p), 10Y -0.14% (-2bps), 30Y 0.43% (-2bps)

NOTE: Simon Ballard is a credit strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice.