Senior & Subordinated Financials Spreads

iBoxx EUR Financials Index data provided by Markit Group Ltd

i) Senior Financials Spreads

Senior financial spreads have widened but have still remained fairly well-bid into the bouts of weakness we have in bank equity prices. Supply has been taken down well, and most investors have decent (rising) exposures to senior bank debt. Liquidity is poor, turnover and volumes low. Funding costs have risen while ECB action of further QE/deeper negative deposit rates doesn’t appear at the moment to be having any material sentiment towards the asset class.

ii) Senior Financials Spreads 2015-


iii) Subordinated Spreads

The subordinated market has come under pressure and that has been evident in the first instance in the CoCo market but the contagion impact was felt in the LT2 arena through February 2016. Weakness in LT2 risk is an opportunity, while we would remain circumspect around CoCos although top quality banks are of interest, especially where poor liquidity in a weak markets seen their CoCo valuations come under pressure.

iv) Subordinated Spreads 2015-


v) 2008-2009: Sub financials collapse and recovery

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