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Is it Just Consolidation?

07 October 2014 by lberuti

After the bullish price action we have seen over the last week or so with some relentless tightening affecting both single name CDS and credit indices, the tone seemed to have changed today, especially in the high yield space. The reporting season will begin tomorrow, and investors needed to take a breather. A number of bonds were better offered, and that fed through the CDS market, where single name protection was bid up throughout the day. That demand for protection was met by a steady stream of iTraxx Crossover index selling (it is optically yielding more than it has ever done this year on the back of the reshuffling of its constituents on Monday), which balanced out the flows thanks to index replication strategies. So far it only looks like a sound consolidation, but on Friday Matalan will report their results which many reckon could set the tone for the single B space.