Derivs - Credit

Tumultuous trading on Monday took credit spreads to some of their widest since 2013, in what was variously described as ‘great entry levels’ for new trades or a ratcheting up of pain for those already nursing bruises from last week’s debacle.

Credit and equity markets suffered a crisis of confidence this week, with several previously crowded trades rapidly unraveling in the face of rising concerns about European banks, US Federal Reserve policy and a perceived lack of European Central Bank firepower to revitalise the continent’s stagnant economy.

Law firm Fried Frank has hired an experienced specialist to set up a European restructuring practice.

Royal Bank of Canada has made two senior hires in its London credit business as it looks to expand in financials and high yield trading.

Société Générale has appointed Ashwan Malhotra as managing director in a bid to strengthen its client coverage in Asia Pacific.

Credit markets endured another rollercoaster week as persistent nervousness prevailed over intermittent optimism and soured an earlier rally.

Last year the Markit iBoxx Euro Banks index was one of the outperforming bond sectors in Europe having returned 1%. The index, which is largely made up of bonds issued by European banks, even managed to outperform defensive sectors such as healthcare and utilities, while Europe’s regulatory oversight and relaxed monetary conditions kept market confidence in check.

The International Swaps and Derivatives Association has extended the deadline for an external review panel to decide whether Novo Banco has triggered a credit event, adding to the protracted deliberations over the Portuguese bank.

UBS has asked Markit to administer and calculate its investible indices, as the bank looks to meet Europe’s regulatory push to improve transparency and oversight of industry benchmarks.

The opening shot for the race to save Abengoa from bankruptcy came on Monday from Alvarez & Marsal, the restructuring firm, and its plan to half the Spanish renewable energy company’s corporate debt to €4bn ­— now the board and creditors must approve the scheme before March 28.

Falling oil prices and China concerns sent credit spreads to the record wides of recent years this week as equity markets plummeted, with a credit index options expiry coming right at the sharp end of the spike and adding to the turmoil.

The economies of Italy and China do not appear to have much in common. Italy’s government would welcome a GDP growth rate of 1%, while China expands at less than 7% and investors take flight. One is a sclerotic, decaying Western country, the other is a dynamic Asian tiger. Such is the conventional wisdom.