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Bull… Bull… Bull…

22 June 2015 by lberuti

Usually the business day following the 19th of June is all about roll. Indeed, this is the date when the maturity of “on the run” CDS is extended by a quarter. Today, when dealers started quoting 5y, they meant September 2020 maturity and no longer June 2020 as they did on Friday. Given that, one would expect the 5 year CDS, which is the risk premium you pay to protect yourself until the maturity of your contract against the default of the referenced entity, to go up. But on the back of new found optimism regarding Greece, which mainly hinged on the fact that they were not told to go its separate way during the day, it was as if the roll never took place. Not only on the run 5 year CDS were not wider, but they were effectively much tighter than last Friday. The bullishness of the market is also obvious when you look at the time series of any credit index. Today was the biggest one day move tighter in almost 3 years, actually since Mr Draghi delivered his “Whatever it takes” speech.