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Healthy Dispersion

09 October 2014 by lberuti

Credit markets have been busy today. The unusually stretched index valuations compared to their fair values (almost all indices are trading rich, i.e. their risk premia are wider than what single names are saying) has led to numerous trades during the session across a very wide spectrum of reference entities. That means that risk has changed hands on almost every name, which is a healthy situation. This has led to some repricing on names that had been stale for a while. On the back of that, even though the daily variations are fairly small on indices, the dispersion on single names was very important.