18 March 2016 by lberuti
Even if we had not gone through the action packed period we had since the beginning of the month (or the year actually), today’s session would have seemed dull. The daily ranges were narrow across the board, on indices and on single reference CDS alike, in Europe and in the US. On many names, spreads stayed literally unchanged through the day. The single name and index roll (it all happen at once twice a year from now on, in March and June each year) takes place on Monday, and investors have used the frantic last few sessions to square their portfolios and trim exposures they no longer felt comfortable with. Fallen angels (companies that were downgraded to junk over the last 6 months) will not be included in the new series investment grade indices and the names which the market deem about to default will not be included in the new series of Crossover. Because there were quite a few, that will lead to the unusual situation where, despite being longer dated, the risk premia of series 25 of iTraxx Main and iTraxx Crossover will be tighter than the risk premia of series 24, and the risk premium of series 26 of CDXIG will be tighter than the risk premium of series 25. That could prompt investors to buy protection and trigger some action on Monday. CDXHY will only roll Monday the 28th.