Derivs - Credit

The distinction of being the widest constituent in the Markit iTraxx Europe is clearly one that most companies would prefer not to have. Yet Glencore has held this dubious honour since before the last index roll in March. It had a challenger in fellow miner Anglo American, but Anglo’s downgrade to junk and consequent removal from the investment grade index left the field open to the Swiss firm.

A surprise upgrade from Standard & Poor’s has prompted Hungary’s international debt to rally 30bp and take its credit default swap surging inside that of Italy, the most traded sovereign CDS reference entity.

The European Securities and Markets Authority has proposed making it mandatory to trade the iTraxx Europe and Crossover credit default swap indices on a regulated market or other recognised trading facility.

Industry-wide collaboration on distributed ledger technology governance is needed and policymakers must plan ahead for the impact of such advances on securities markets and post-trade infrastructures, The Depository Trust & Clearing Corporation has said.

The decision of buyside participants in credit and equity markets to remove near term hedges in favour of end-of-year trades has been called into question this week, with volatility picking up after the the summer lull and several potential catalysts for further upset looming next week.

Credit risk has awakened from its summer slumber over the last couple of days with the CDX IG and iTraxx main index now trading 8% and 11% higher than their close on Thursday. While it’s still too early to see whether this latest surge is a passing event or a longer lasting trend, both indices are still below their 12 month averages and now trade roughly 40% off the highs set earlier in the year.

The International Swaps and Derivatives Association has appointed a senior official of the European Bank for Reconstruction and Development to its board of directors, in its first ever appointment of a supranational institution.

IHS Markit will not overhaul the iTraxx Europe credit default swap index at the September roll next week to address UK bank debt regulations, say analysts, but the index operator will look at whether to change its rules in the near future.

IHS Markit will not overhaul the iTraxx Europe credit default swap index at the September roll next week to address UK bank debt regulations, say analysts, but the index operator will look at whether to change its rules in the near future.

Emerging market economic growth managed to hang on to much of its momentum over August, according to the latest release of the IHS Markit Emerging Market Composite PMI index.

Credit investors have built up close to all-time record long positions in iTraxx indices, with the approaching September roll increasing reluctance to hedge against a potential move wider despite near historically low volatility.

Talk of the European Central Bank extending its bond buying programme to banks sent the iTraxx Europe Senior Financials credit default swap basket back within 20bp of the Main index on Monday and to its tightest levels since the UK referendum vote on EU membership at the end of June.