Loan Ranger: Wild rides are better than fantasy
Just as a violent storm is sometimes what weather systems require to break a passage of mounting atmospheric pressure, a sudden dose of volatility can also be just what financial markets need to refresh themselves and avoid stagnation or overheating. So it goes too with the pastimes of loans bankers.
The wild white-knuckle rides of the kind taken by market participants in recent weeks are usually found, in retrospect, to have been controlled, range-bound events that are a healthy and invigorating reality check. They shake things up, blow out some stale air and provide what seasoned credit traders calmly and callously describe as “better entry levels”.
The last two weeks have certainly been a roller coaster. The week before last, having reached what some may have suspected were unrealistic tights, iTraxx Europe and Crossover surged wider to 77bp and 405bp respectively, with Crossover seeing a 40bp intraday move. Oil plummeted to a two year low of $80.5 and the 10 year US Treasury fell below 2%.
After this vertiginous fall, markets have generally ridden the curve at the bottom and started to soar back up again. Oil continues to confound investors, but iTraxx Europe and Crossover are back to 65bp and 346bp, with the US 10 year Treasury at 2.30%.
While providing many in bonds and equities with a few extra grey hairs, the whole squall seemingly passed loans bankers by with barely a ruffle. They claim to have felt nothing of the excitement – their market moves much slower, they say, and is subject to different pressures.
So much so that one loans banker felt the need to follow the worst of the market volatility with a holiday that would give him something of the exhilaration he had missed out on – a trip to Europa Park in Germany to ride the rollercoasters.
Here you can find such attractions as the Blue Fire Megacoaster powered by Gazprom. This claims to have “the highest loop of a launch-coaster in Europe, a thrilling 360° roll and two more head-over-heels elements”, all at 100km an hour and a maximum acceleration of 3.8G.
There are many more that offer similar levels of terror. The loans banker loves them all.
“For me, this park is the best,” he says. “Much better than Disneyland.”