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Want To See What A Bull Roll Looks Like?

20 March 2015 by lberuti

If you ever want to see a bull roll, today was the day you were waiting for. While the kids were busy watching what was described as a “breath taking spectacle” when parts of Europe were plunge into darkness during the “best eclipse in years”, their parents were busy selling protection on almost every available name. Today was the day where standard maturities were pushed by a quarter. For instance, the 5-year maturity is now June 2020 as opposed to March 2020 until yesterday. So the least you would expect is for 5 year risk premia to increase a little to account for these extra 3 months. But as you can see, not only risk premia did not increase, but they even decrease on average. We were expecting many bright red squares, and the only bright boxes are green. Investors were selling June 2020 protection today at the same (or even at lower) levels than they were selling March 2020 protection yesterday. If you navigate across the different categories (European/American, Investment Grade/High Yield are available on the right end side of the grapple), you will get similar results which ever combination you choose. That is what we call a “bull roll”.