This grapple sums up some of the overarching themes which have been at play in the market over the last month. First compression has been in full swing. There is now very little dispersion in terms of risk premia between the different sectors. They have all converged towards the level of the investment grade index, ie roughly 70bps for the 5 year maturity. The other salient feature is the outperformance of the financial sector. During last month, sellers of protection on financial names have emerged in the market and dealers have been overwhelmed by the amount of CDS they had to buy. Fortunately for them, there were some hedges against a deterioration of the situation in Ukraine which were bought using options on the Financial Senior Index (ITXES), which in turn generated some buying cares on the Index, which in turn generated some bids for protection on the index constituents on the back of basis arbitrage trades. But these only managed to prevent a complete collapse of the risk premia across the financial sector. Natural buyers of financial protection are few and far between, as no one wants to catch a falling knife.