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08 May 2014 by HCM

The market opened with an indifferent tone. Despite the positive tone in the US overnight, protection was trading sideways, pretty much unchanged from the previous day’s close. This was true throughout the morning session, and the range was very narrow until the ECB conference began. When Mr Draghi made a seemingly innocuous comment about being ready to cut rates at the next meeting if required, he set risky assets on fire and credit happily took part in the rally. As investors admitted recent psychological levels had been broken for good (70bps on iTraxx Main 5y and 275bps on iTraxx Crossover 5y), proper capitulation on short risk positions begun and people started hitting bids on protection as if there were no tomorrow. Credit indices eventually ended the day at levels not seen since the beginning of the crisis… not the sovereign crisis in 2011, but the subprime crisis in 2007/2008.