13 March 2014 by HCM
The price action was very benign for most of the day. But mid-afternoon headlines about military escalation in Ukraine surfaced, and that really brought fear into the market. Credit indices started to move wider fairly fast and as we often see in these circumstances, single names were slower to react and their move was more contained. That led to a sharp move of the basis (difference between an index quoted price and its fair value) which, on iTraxx Crossover (ITXEX), went from 55cts to more than a 1%. The market already experienced such a basis move when the Emerging Market crisis broke in late January. Whenever a violent move takes place in credit, you can tell its velocity by the magnitude of the basis change.