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No More Fear

28 April 2017 by lberuti

After a start to the week that brought moves we had not seen since the since week Brexit came on top in the UK election held last June, the last few days have been far less volatile. Credit indices were effectively stuck in a fairly narrow range (66bps-68bps for iTraxx Main - ITXEB -, 63bps-65bps for CDXIG, 275bps-265bps for Itraxx Crossover). The angst that prevailed before the first round of the French presidential election is now gone. It is best shown by the implied volatility of credit index options which has collapsed since last Friday. While you had to pay 12cts a week ago to buy an option giving you the right to buy ITXEB Series 27 5y at 90bps with a 17th May expiry, 3cts bought you today an option giving you the right to buy it at 75bps this afternoon.