Equity rally prompts tightening of financial spreads

The cost of protection for financials widened out mid-week. Traders said a surge of selling on the equities market by hedge funds and other speculators generated a wave of negative market sentiment that pushed bids for protection wider. Insurance companies came under notable pressure. Senior credit default swaps widened by 20bp for German insurer Zurich to 225/332bp, and 20bp for Hanover Re to 274/284bp. Both Swiss Re and Munich Re widened 5bp to 70/80bp.

The German banking sector also came

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