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The Mighty Roll

19 March 2018 by lberuti

It was a pretty ugly session for equities, with indices roughly down 1.5% across the board. Implied volatility was also on the ascend with the infamous VIX back above 20%. Corporate bonds were also under pressure as the market had to digest more new issues that added to the recent busy calendar. It was all the more surprising to see the muted - to say the least - reaction of the synthetic market. Credit indices held very well with iTraxx Main and CDX IG only 1.5bp and 1bp wider at 51bps and 55bps respectively. Outright activity on single name CDS was light, and flows were largely limited to position squaring and investors rolling positions from December 2022 to June 2023 maturity. There was very limited need to hedge portfolios, and whatever need there was was met by people willing to take profit of short risk positions. It looks as if everyone is paralised by tomorrow’s roll and uses it as an excuse not to express any bearish view. The only name that keeps running away is COFP ( Casino Guichard Perrachon SA ), which was another 10bps wider at 255bps. Its risk premium has increased by 50% since the company released its results early March.