Off-the-run investment-grade credit-default swap indices became liquid for the first time after September's bi-annual North American CDX roll. The replacement of auto names, which dropped out of the indices after ratings agency downgrades last spring, with different risk was "a valid reason to keep the old index going," a credit derivatives trader said.
On-the-run versions of the nearly three-year-old five- and 10-year CDX only just became liquid last year, traders said. They are seeing greater liquidity in both the old CDX Series 4, which carries auto risk, and the current CDX Series 5, which includes leveraged buyout risk. "Both are very liquid right now," a trader said. If the March roll includes different risk from Series 5, traders expect all three to remain liquid. But if Series 6 contains many of the same names as Series 5, they expect only to see trades of Series 4 and Series 6.
