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Spring Rolls

07 April 2017 by pdonnat

Last 20th March, the CDS market served one of its best exotic dishes: the CDS and indices rolls. This was the latest opportunity for the DataGrapple team to update the Grapples. First, we increased the set of names covered. We then removed those unfortunate names which have defaulted over the last 6 months since the last update. The new names include CDS which were never quoted before and which are now members of the on-the-run series. In March, Europe added 3 such names in the iTraxx Crossover: CLNX ( Cellnex Telecom SA) - the Spanish operator of telecommunications towers, spun out from Albertis in 2015, CSTM ( Constellium NV ) - the producer of aluminium cans but also elements for planes and cars (CSTM includes former French Pechiney activities and Arconic is its main competitor), SPMIM ( Saipem SpA) - the Italian offshore driller service operator, backed by ENI. Given that these CDS have never traded before, DataGrapple computes alleged prices displayed with dotted lines on the attached Grapple. The method is simple: we assign an expert cluster to each new name as a function of its rating, its region and its sectors. Using the first 10 days of trading, we compute the average ratio of the actual spread to the associated cluster average. Applying this ratio to the cluster center time series, we get an indication of where these CDS could have traded in the past, back to 2006.

The DataGrapple team has also updated the Machine Clusters, defining sets of CDS following the same trading pattern. The new clusters can be compared with the former one using the Sankey Grapple available in the GrappleStore. The addition of the recent period does not add much information. Worthy of mention, the European retailers are moving out of the consumer non-cyclical cluster into the global European corporate cluster including cyclicals. They do look more sensitive to the economic environment than the beverage producers.

Meanwhile, the credit market displayed little sensitive to Syria. Activity was subdued and intraday volatility was close to zero.