24 August 2015 by pdonnat
The credit market was not the leader in the market sell-off today. While the STOXX Europe 600 is 10% lower from its end of June closing (before the Greece referendum), the Crossover index is just 35bps wider at 364bps. The realized volatility on credit indices is flat while the equity realized volatility has just doubled over the last 2 sessions. The commodity complex was the most active sector on the single names. But, the credit market was essentially active on the credit indices. The indices behavior remained "rational" all day long. Looking at the Grapple and the variation of the various Europe on-the-run indices, all bubbles are aligned, the widening is proportional to the spread. The collective behavior of the credit premiums is dominant over any specific risk. Such a behavior is a change over our last blogs, systematic risk is back in the credit market.