European Stocks Revert Back Down To Credit's Pessimism (As 2Y Swiss Drops To Record Lows)

Tyler Durden's picture

Just as we noted yesterday, the ludicrous late-day ramp in European equity markets relative to the absolute nonchalance of credit (corporate, financial, and sovereign) markets, has now reverted totally as broadly speaking Europe ends the day in the red. Spain and Italy stock indices bounced a modest 0.5% on the day as the UK's FTSE and Germany's DAX suffered the most (down 1-1.5%) on Banking Lie-Bor drama and unemployment respectively. Corporate credit leaked a little wider on the day with the investment grade credits underperforming (dragged by weakness in financials). Financials were notably weak with Subordinated credit significantly underperforming Senior credit (bail-in anyone?). Sovereigns were weak overall (not just Spain, Italy, and Portugal this time) as Spain's 2s10s has now flattened to year's lows. Swiss 2Y rates dropped further - to record closing lows at -35.2bps (after being -39bps at their best/worst of the day - suggesting all is not well, and Bunds largely tracked Treasuries as the SCOTUS decision came on and pushed derisking across assets. EURUSD tested towards 1.2400 early on but is holding -35pips or so for now at 1.2430.

European stocks (blue) came and went from yesterday's exuberance as credit stayed neutral. The light blue (subordinated financial credit) underperformed quite notably...

But sovereigns continue to push higher in yield and spread (and even non-peripheral names are leaking now)...

 

Swiss 2Y Rates dropped to new record lows (hitting -39.1bps at its best/worst of the day)...

 

Charts: Bloomberg