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What Is The Colour Code?

05 September 2014 by HCM

In Datagrapple, the colour code is simple: if a name is red, its risk premium has increased (its credit spread is wider) over the period you are considering; if a name is green, its risk premium has decreased over the period. And the brighter the colour, the larger was the move. But since the beginning of the week, it can be read in another way. If a name is red, it is almost certainly a US entity; and if a name is green it has to be a European entity. And the brighter the colour, the larger the spread. It is also true if you look at the grapple showing today’s move by changing the time span to 1 day. A decisive step towards QE by the ECB on the one hand, and FED hawks becoming more vocal in the US on the back of data pointing to an economic recovery on the other hand resulted in European credits outperforming US credits. It also led to spread compression in Europe and spread decompression in the US. While iTraxx Main has converged towards CDX IG, iTraxx Crossover has diverged from CDX HY.