Our Experts Comment the Times Series

See All the Comments

CDS Metastability

28 July 2014 by HCM

Looking back at what happened in the CDS market over the last month, the market appears to be trapped in a local equilibrium. All European sectors have traded in tight ranges compared to the recent volatility. Financials have traded in a 10 bps ranges while the other sectors have traded in less than 6bps. More investors are playing the tight ranges. But, this pattern of stability is rather unusual. As a consequence, an outbreak of the recent ranges should be significant as a brutal freezing of below zero degree Celsius liquid water.