EU Credit Probes April 2015 Trendline as Stock Volatility Falls
Source: BFW (Bloomberg First Word)
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(Bloomberg) -- iTraxx Xover testing April 2015 trendline after tightening from 38.2% of Nov. 2011 decline (see weekly chart here), Bloomberg strategist Tanvir Sandhu writes.
Alert: HALISTER1- iTraxx Xover has tightened ~80bp after March ECB meeting to 303bp while SX5E 3-mo. ATM vol has declined to 21 from 30
- Swings in SX5E tend to move in tandem with Xover, see chart here
- 21-day correlation between SX5E and Xover is -0.62 vs YTD low of -0.93
- Xover may compress to 2014 low at 218bp on break of the April 2015 trendline
- Although ECB purchases will be restricted to non-bank IG bonds, credit investors are likely to rotate into securities offering higher carry due to supply scarcity issues
- NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for First Word. The observations he makes are his own and are not intended as investment advice.
Source: BFW (Bloomberg First Word)
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UUID: 7947283