Credit remains stable as primary market activity drops

The performance witnessed in credit markets over the past week has been relatively muted, with spreads trading within a range and total returns stable, primarily generated through the carry trade. A better showing than the hammering credit got during the previous week where spreads widened significantly, particularly the stronger credits. All in all, spread levels are relatively flat since the beginning of the year, and with the exuberance in credit witnessed during January nowhere to be seen any more, the market’s attention will swiftly focus on this week’s Italian elections. No great shakes are expected for the markets, both on the upside and the downside and credit spreads are expected to remain range trading. From a fundamental perspective, the eurozone economy is in pretty good shape, and is still on its recovery trajectory. There have been upwards revisions, both in economic data and inflationary numbers, and the sanity and state of the economy is intact. Upgrades are outshining credit rating downgrades whilst earnings have, on average, been satisfactory, though nothing to write home about. The rising benchmark yields coupled with the trimming of the QE program have the...