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A Session For The Longs

21 March 2016 by lberuti

The roll took place today. For the first time, the maturity of the “on-the-run” single name contracts (aka the standard 5 year) were extended by 6 months to the 20th June 2021, rather than the customary 3 months. It looks as if the market was well prepared, and the day felt very orderly. It did not look any different from any previous roll day. New series of indices were issued in Europe, the US and in Asia. The maturities of the on-the-run contracts were extended by 6 months (which was already the standard for indices) and their composition were adjusted to factor in rating and liquidity changes. Big amount of indices were rolled as investors positioned themselves on the newly issued series which will attract most of the liquidity going forward, with several dealers reporting traded volumes in excess of €40bln. It seems that people who are holding long risk positions decided to roll first though, taking comfort from the improved credit quality of all new indices. The selling flow of rolls (people selling protection on the new series to buy protection on the previous series) was relentless and index rolls closed at their most negative levels (-23bps on iTraxx Crossover with S25 closing at 296bps and S24 at 318bps, -1.25bps on iTraxx Main and -7bps on CDXIG) while their fair values were steady during the session.