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Volatilty? Yes. Dislocation? Not So Much.

12 February 2016 by lberuti

It felt quieter today - volumes were effectively down from previous sessions with $8.8bln traded on iTraxx Main (ITXEB), $3.7bln on iTraxx Crossover (ITXEX), $2.4bln on iTraxx Financials Senior (ITXES) - but mainly because investors were not whining as loudly as they are when risk premia are on the rise. Daily variations were as impressive as they have been all week, and they almost cancelled yesterday’s moves. Given all the noise that was made around banks and the intense pressure they have been put under - at some stage yesterday, DB’s 5 year risk premium was trading 70bps wider at 275bps compared with last Friday’s close -, it is amazing that ITXES is finishing the week only 5bps wider at 126bps – it traded at 138bps this morning! -. The volatility has been intense, but market dislocations have been contained. The main sign of stress that appeared was actually the basis of ITXES going deeper into negative territory.