27 November 2014 by lberuti
Everyone expected a quiet session today with the US celebrating Thanksgiving and not due back in the office before tomorrow. But the trading activity turned out to be reasonable and the rally seemed to be unstoppable. Except for a few spots of weakness (ABGSM was as volatile as ever dragging ASTIM wider in its wake, and OTE’s 5 year CDS took a breather following its recent 150bps rally), most entities saw their risk premium decrease during the session. Despite that, they did not manage to keep up with the pace of the indices. iTraxx Main but especially iTraxx Crossover had their risk premia collapse at the end of the session during a late spell of short risk capitulation. That sent the bases to their theoretical prices of these 2 indices (the difference between their quoted price and the value derived from their individual constituents) to levels not seen in more than a year. Tomorrow single name CDS will have some catch up to do and the clearance of protection might well go into Black Friday.