25 August 2015 by pdonnat
All risky assets classes from commodity to credit or equity have rebounded today. The oil is back up but the turmoil in commodities is far from being over. In the credit space, the European basic materials CDS market is very active, trading more than 300MUSD per day according to DTCC. The widening has been close to a straight line since the beginning of July for GLEINT (Glencore International AG), AALLN (Anglo American Plc) and XTALN (XSTRATA Limited) while the chemicals have been more stable with raw materials much cheaper. Today, the market U turn was uneven. Glencore is under performing Anglo American by 30bps. If you change on the Grapple the window from a year to the whole sample, you can observe that Glencore has always been a high beta risk to Anglo American. There are a lot of hedging activities on Glencore due to its commodity trading operations. Having Glencore CDS trading closer to Anglo American's one will be a strong signal of a real market turning point.