From significant outperformance early in the European trading day, Financials lost considerable ground as the US opened and bank funding problems were admitted. Obviously, Europe had some catch up to do to the afternoon session in the US Friday, but it went beyond that with Senior Financials closing near the day's wides even as the broader equity market in Europe was only down around 1.3%.
The underperformance (against their intrinsic value and peer asset classes) of both Main (the investment grade credit index) and Senior Financials (which are both the lowest cost liquid indices to 'hedge' with in European credit suggest significant macro protection is still being added here. EUR making new multi-month lows below 1.33 as EURJPY tanks and CEEMEA sovereigns widening dramatically also does not help restore confidence as Gold gets a safety bid and USD strengthens.
UPDATE: BAC just broke back into the $5 handle, XLF is now underperforming -1.2%, and MS is -1% at day's lows after being up around 5% early on (but CDS/bonds were weaker all morning).
Credit swung from outperformer to underperformer on the day with financials closing near their wides (red line inverted scale) as investors sought lower cost liquid protection. All the major indices (and massively broad and weak breadth across single-names) were wider but sovereigns were a little mixed. Mostly wider but a few (IA, ESP, SWE) managed to eke out a very small compression. Belgium (+14 to 275bps) was major underperformer as our much beloved DEXIA looks in more and more trouble (we are just waiting for 'Belgium is not Ireland' comments and we will know for sure). CEEMEA nations were all significantly wider with Romania and Czech Republic worst relative performers (and South Africa interestingly also weaker).
In FX, the EUR was the worst performer of the majors relative to the USD, breaking to a 1.32 handle and notably divergent with JPY strength. EURJPY continues to make decade lows as it seems carry unwinds must be exaggerating some of that pressure.
Precious metals and commodities are all up from Friday's close with oil and copper just in the green while Silver is +2.8% and Gold is +1.9% - even with a stronger USD.
On a medium-term basis, broad risk assets (CONTEXT) are pulling south to meet equity's perspective as stocks have led them down in this last pull to the magical 1120 line. It seems we need more broad-based selling in carry FX, oil, and 2s10s30s compression to really extend this sell-off - even as TSYs are near day's low yields with 30Y -9bps from Friday's close.