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The Return Of Volatility

30 April 2015 by lberuti

It might not strike you when you look at the daily changes of the different indices, but the session was incredibly volatile. The end result is some decompression in Europe between iTraxx Main (ITXEB) and iTraxx Crossover (ITXEX) on the one hand, and some outperformance of ITXEB compared with CDX IG in the US. That does not tell the whole story though. If ITXEX is closing almost unchanged at 272.5bps (it is 1bp tighter on the day), its total variation (ie the sum of the successive moves wider and tighter during the day) was well in excess of 50bps. All that happened while very little new news was reaching the market and the prices’ moves appear to be due mainly to the thin liquidity. It is a theme which has been discussed at length recently on different asset classes, and credit is no exception, particularly ahead of a long week-end.