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A Long Overdue Consolidation

18 April 2018 by lberuti

Like every third Wednesday of the month, today was option expiry day in creditland. Even though iTraxx Main series 28 spent the day wrapped around 45bps, this level was not a big option “pin” – ie a strike with an important option open interest - and it did not trigger any technical trading as a result. It was a benign expiry session, even though the tone was weak for most of the day, and indices closed wider for the first time in almost two weeks. It all started yesterday afternoon after a few buy-side institutions came and took profit on some of their long risk positions on credit indices. It spilled over into today’s session. To be fair, despite equities chopping around but ultimately maintaining their upward trajectory, a bout of profit taking was overdue. iTraxx Main has tightened by 10bps - from 62bps on the 26th March to 52.5bps yesterday – almost in a straight line.