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Derivatives

TRAC-X Widens, But Blink And You'd Miss It

TRAC-X North America, which follows the most liquid 100 credit-default swaps, widened 2 basis points to 64bps Wednesday morning before a flurry of trades pushed it back in line with the tightening trend that has gripped the credit markets over the last several months. The index finished the day at 62bps. James Parascandola, credit derivatives trader at Barclays Capital in New York, said the shift was a considerable one for the index, which is generally not volatile.

The sudden widening can be attributed to several negative events occurring within a short time, said Parascandola. A decision by the Organization of the Petroleum Exporting Countries to cut oil production contributed to the sell off in equities, which negatively impacted credit spreads.

At the same time a large retail account bought protection on several credits, he noted. Several traders pointed to West coast money management giant PIMCO as buying a total of around USD100 million in protection on 10 names. Mark Porterfield, spokesman at PIMCO in Newport Beach, Calif., did not return calls.

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