Keeping Up the Pace

The period of high volatility continues, as more talks about the “US Fiscal Cliff”, Greece and Spain continue to hit the financial headlines. Yet, one would expect that going through 2013 a credible solution to the European sovereign crisis will be found and therefore this should (at least in theory) be reflected positively on the iTraxx Senior Financials Index and credit in general. Furthermore, 2013 should bring further improvements in Banks’ balance sheets as they get ready to meet the Basel 3 regulation requirements. This in turn, should also be a credit positive.

Today, yields on the 10 year US paper declined to two months low as President Obama is scheduled to meet with Congress to discuss the “Fiscal Cliff”. Despite President Obama stating that he will not offer tax breaks to the ultra-rich as his mandate stated such in the last election, there is a positive feeling that compromise will be reached on the whole measures and Congress will come together to address this issue. Time only will tell whether this optimism will actually be turned into reality.