Holy Sh*t Chart Of The Day
This may be "familiar behavior for the credit market", as BofAML puts it, but I can't help but flag this as a pretty alarming indicator regarding the credit risk surrounding the upcoming French elections.
So this is the correlation of iTraxx Main spreads to OAT-bund spreads. In other words, this is the correlation between €IG credit risk and the relative riskiness of French sovereign debt versus German sovereign debt.
(BofAML)
That, ladies and gentlemen, is a record.
Via BofAML
French el
The interesting thing is the spread value is due to two factors. 1) The impact of the elections going to Le Pen and 2) The probability of the elections going to Le Pen. I have to believe that “1” has stayed within a fairly narrow range and what is driving the change is an increased probability of “2”.