09 April 2015 by lberuti
Today was a fairly lacklustre session as the release of the FOMC minutes failed to have a lasting impact on the market. That said, central banks’ action are still at the forefront of investors’ preoccupations. The diverging paths of the FED and the ECB was behind today’s underperformance of CDXIG against iTraxx Main (ITXEB). Indeed, that was one of the main reasons why people decided to take advantage of the recent tightening of CDXIG relative to ITXEB, and decided to put on so-called “decompression trades”. A longer dated analysis is somewhat biased by the March roll (the risk premium differential between CDXIG523 and CDXIG524 stands at 0.375bps while it is worth 6bps between ITXEB522 and ITXEB523), but the spread between CDXIG524 and ITXEB523, which traded at 9bps at the end of March, was worth 4.3bps yesterday at the close. In a market which is currently short of conviction, that was enough to trigger some relative value trading.