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Wider Bases In A Risk Off Day

09 September 2014 by HCM

Today was another essentially risk off day. In a typical fashion less than 2 weeks before the roll, investors favoured indices over single names. They use the most liquid products, but mainly they use products whose liquidity will not be impaired after the roll. It is therefore not surprising to see that the bases of the most commonly traded indices have widened today. The odd one out was the iTraxx Financial Senior though. This is the sector where single names experienced the busiest trading sessions since the beginning of the week, after recent polls gave the “yes” and “no” going neck to neck in the referendum about Scotland independence. The coming changes in documentation will impact the liquidity of the current CDS, but the new contracts will only be available after the results of the 18th September referendum. That is why investors have been busy buying protection on banks over the last few days pushing iTraxx Financial Senior fair value wider.