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CDXIG: To 100 And Beyond…

12 January 2016 by lberuti

The credit market felt bullish for most of the day in Europe. After a weak open on the back of another poor overnight session for commodities, protection sellers rapidly emerged as short risk positions set up during the previous sessions by the hedge fund community were trimmed. At some stage in the afternoon, after the US came in and the S&P reached 1945pts, it felt like verging on capitulation. But with oil reaching new lows and flirting with $30/barrel, the mood quickly changed and credit indices went turbo bid into the close. That was true in Europe (Main went from 84bps to 86.5bps and Crossover from 345bps to 355bps), but the move felt even fiercer in the US with CDXIG going from 96.5bps to… 100bps. This energy heavy index is eventually the first of the investment grade indices to reach that threshold, and looking at its theoretical value (computed using the individual risk premia ot its constituents) which stands at 117bps, it could go much wider…