Goldman recommends Senior Financials versus Europe play

In their latest credit research, Goldman Sachs strategists recommend selling protection on the iTraxx Europe Senior Financials basket while going short the main index. They say the play gains from an expected normalisation in systemic fears. The ratio of the trade is 1:1.2 with a stop loss of +/- 70bp applied.

European banks have been in the eye of the recent crisis, but Goldman thinks that stress test results will confirm the situation is sustainable. This should make investors shift their focus to the weakest credits, away from systemic fears.