23 July 2015 by lberuti
Since early March until early July, the trend was obvious. Buying protection on iTraxx Main (ITXEB) and selling protection on CDXIG in the US was a winning trade day in day out. People were betting heavily against Greece using ITXEB and were looking to get some of their carry back selling CDXIG CDS. On the most recent series, the spread between ITXEB and CDXIG went from -6bps on March 23rd to +9bps on July 6th, the day after the Greek referendum. Since then, Mr Tsipras decided to bow to Greece’s creditors’ demands, pushing the day when the Greek debt pile problem will have to be addressed further down the line. At the same time, investors took note of the commodities’ tumble. So suddenly the energy heavy CDXIG did not look such a safe investment anymore, while Europe did not appear that risky under the close guard of the ECB. We have gone full circle in 4 months and the ITXEB/CDXIG spread is back to -7bps.