With Unicredit's stock down 14% and sovereign spreads continuing their decompression trend, European corporate and financial credit markets are tanking - dramatically underperforming European equity markets. Perhaps the credit market is much more acutely aware of the 'bumpy road [4]' ahead in terms of supply and the heavy calendar of both sovereign [5]and corporate [6]issuance at a time when demand (away from Ponzi bonds) seems weak. Nowhere is that pressure more obvious than in French government debt spreads which have popped over 40% in the last week, ahead of tomorrow's huge issuance and redemptions.
[7]
Financials are dominating the selling pressure - with subordinated debt underperforming - but broadly credit is massively underperforming equities (dark blue line). Credit is unch to wider on the year now while equities are still 3-4% higher...
[8]
and French government bond markets are getting destroyed ahead of tomorrow's huge supply.
Charts: Bloomberg