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Rearview Grapple

27 February 2015 by pdonnat

The psychodrachma subsided this week and the European Investment Grade credit index is closing at its tightest level since the end of 2007. The full effect of the quantitative easing coupled with large inflows in high yield funds had a relentless effect on the CDS market. All risk premia have collapsed: curves are flatter, the iTraxx Europe Financial Senior is back close to the iTraxx Europe, iTraxx Europe is outperforming the CDX.NA.IG closing at 49.5 versus 61.5. The Grapple provides a full picture of the market over the last 9 years. The trend is obvious but the market has been a succession of squeeze and pullback. So March will as interesting as February, including the credit indices roll.