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Xover Constituents Struggle to Keep Pace

03 April 2014 by HCM

After an hesitant start to the day, credit indices gradually traded tighter with market participants allegedly cutting hedges after Mr Draghi’s press conference, and all indices finished the day tighter. But the performance is less impressive if you look at what happened to the single names. If the investment grade universe benefitted from the momentum of the financial subset, the High Yield names (the iTraxx Crossover constituents) actually saw their 5 year risk premia increase as a whole. It could be that investors needed a pause before tomorrow’s NFP as the market has known just one direction since the beginning of the week. It might also indicate some market participants start to consider valuations as a bit rich, and begin to take chip off the table.