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Nothing Sticks

19 May 2017 by lberuti

The last couple of sessions had brought some hope among the most uncivilized market participants that maybe there could be a period of volatility ahead of us. It seemed for a while that political uncertainty could eventually have the better of investors nerves. But that was just that: hope. It appears that nothing can stick on the market at the moment, and whatever concerns people had regarding emerging markets or the stability of the Trump administration were swiftly brushed aside. Equities were back on the front foot across the board, and credit markets resumed their march tighter, once again closing in on the tightest levels of the current series. The brief spell of flat(tish) basis - difference between the fair value of an index and its theoretical value derived from its constituents - for CDX IG, which is usually a sign of stress in the market – it typically materialises when investors reach for the most liquid instruments to hedge their portfolio and buy credit index protection -, appear to be over for now.