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New Docs And Liquidity

27 August 2014 by HCM

The statistics published by DTCC today confirmed what market participants felt last week: volumes have decreased steeply during the second half of August. Different bank holidays across Europe and the easing of geopolitical tensions contributed to the declines. But the most salient feature is the fact that iTraxx Financials (Senior and Subordinated) experienced the steepest fall in volumes. Like CDS referencing sovereign and a few corporate entities (INEGRP, AFFP, INTELSAT and VNU), existing trades on these two indices will not be fungible with trades made after the September roll when new CDS definitions will be introduced. Investors are understandably shying away from trading them, except for unwinding existing CDS transactions as liquidity on “old docs” contracts should be hampered going forward. Unless there is some serious worries around banks specifically, expect this trend to be confirmed when the next set of market data is released next Wednesday.

Third Week of August Index Average Daily Traded Volume (DTCC)
Index Volume (Billion) Weekly Change
CDXIG2233.56-11%
ITXEB2134.57-24%
CDXHY2212.11-31%
ITXEX2116.59-3%
ITXES216.54-45%
ITXEU210.14-56%