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Will Euro Indices Protect You Vs Greece?

30 March 2015 by lberuti

Today risky assets have been rallying hard across the board. Equities were up between 1 and 2% around the globe, interest rates were lower, and credit spreads were tighter. The fair value of all European and American credit indices were tighter indeed, so it was all the more surprising to see that both iTraxx Main (ITXEB23) and iTraxx Crossover (ITXEX23) closed actually wider on the day (ITXEB23 5y closed 0.4bps wider at 56.25bps and ITXEX23 5y closed 1bp wider at 262.5bps). It looks as if these 2 instruments, which are arguably the most liquid in the credit universe, are used to hedge entire portfolios against a negative outcome in the current negotiations between Greece and their European creditors. During such a generally positive move, one would expect the bases to become more negative, but we got exactly the opposite on ITXEB23 and ITXEX23.