Senior & Subordinated Financials Spreads

iBoxx EUR Financials Index data provided by Markit Group Ltd

i) Senior Financials Spreads

Senior financial spreads have started to tighten in 2017 and senior debt has remained fairly well-bid into potential for higher rates and steeper curves – and recovery in bank credit metrics. Supply has been taken down well, and most investors have decent (rising) exposures to senior bank debt. Secondary market bond liquidity is poor, turnover and volumes very low. There’s a growing confidence in the financials sector and we can think that the outperformance in financials versus non-financials is set to continue through 2017.


ii) Senior Financials Spreads 2015-

 


iii) Subordinated Spreads

The subordinated market had come under pressure and that had been evident in the first instance in the CoCo market but the contagion impact was felt in the LT2 arena through February 2016. One year on, the tide has turned and the CoCo market and subordinated debt sector overall is where the money is being parked. Yield is still the modus operandi of the investment process and improving sentiment towards financials is helping for some good performance here.


iv) Subordinated Spreads 2015-


 

v) 2008-2009: Sub financials collapse and recovery

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