06 February 2014 by HCM
If you ask any market participants what has been the most salient feature of the credit market over the last couple of weeks, the unanimous answer will “extreme volatility”. But except for a significant daily variation on the 24th January, it is not obvious from looking at the graph representing the close to close. Most of the volatility took place intraday, especially on indices, as every move was exacerbated by option players who had to manage chunky negative gamma positions. The best estimator of that intense volatility is actually the volumes that have been traded during this period. And they have been impressive recently. Combining Europe and the US, during the last week of January, $167bln of indices traded each day on average. If we except the weeks around the rolls, there was a fortnight in July last year (anyone remembers the effect of QE taper?) when volumes were higher.