Italian nerves ahead of election
Risk appetite receded slightly in a trading day subdued by pre-election jitters in Italy and holidays in the Far East.
The Markit iTraxx Europe was just over 1bp wider at 117bps, with Italian corporates among the worst performers.
There are less than two weeks to go before the general election in Italy, and the latest opinion polls show that the centre-left party holds only a slim lead over the right-wing populist party, led by former Prime Minister Silvio Berlusconi.
A strong showing by Berlusconi would be the worst possible outcome for the markets, as it could prevent the centre-left from implementing much needed reforms. Italy's CDS were steady at 266bps today, though it would be no surprise to see volatility in the days ahead.
Elsewhere, there was little movement in spreads, with few catalysts to shape sentiment. It will be a fairly busy week for European earnings, although the US earnings season will start to slow down.
Headlines around the Cyprus bailout - which may now force depositors to share the burden, if the latest reports are to be believed - could influence spread direction in the coming days. Moreover, eurozone GDP figures due out on Thursday will also be closely watched.