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Today Was Roll Day For Single Name CDS

20 June 2014 by HCM

Today the 5 year “on-the-run” maturity for single name CDS has moved from June 2019 to September 2019. Accordingly, the maturity of the risk premia displayed by DataGrapple was extended by 3 months and one would expect these risk premia to be wider by roughly 5% in a stable market (if you assume linearly increasing risk premia, 3months is 5% of 5 years). This is what happened in the financial sector which for once was surprisingly rational, with most of the single names in that space rolling up their curve. Names in other sectors experienced a slightly more bullish roll and ended the session less than 5% wider on the 5 year CDS point, despite indices (whose maturity were not impacted by the roll) ending the session a tad wider across the board. The direct effect was index bases to theoretical closing wider on the day on all indices.