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' ahead in terms of supply and the heavy calendar of both sovereign and corporate 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.
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...
and French government bond markets are getting destroyed ahead of tomorrow's huge supply.
Charts: Bloomberg