Weekly Credit Market Summary
BySpreads were tighter in the US this week as all the indices improved. Indices typically underperformed single-names with skews mostly narrower (as curves steepened and high beta outperformed low beta) as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO underperformed but compressed the skew, and HY outperformed but narrowed the skew.
The names having the largest impact on IG are American International Group, Inc. (AIG) (-272.37bps) pushing IG 1.24bps tighter, and Pfizer Inc. (PFE) (+3.5bps) adding 0.03bps to IG. HVOL is more sensitive with American International Group, Inc. pushing it 5.5bps tighter, and Caterpillar Inc. contributing -0.07bps to HVOL’s change today. The less volatile ExHVOL’s move today is driven by both National Rural Utilities Cooperative Finance Corporation (NRC)(-65.63bps) pushing the index 0.66bps tighter, and Pfizer Inc. (+3.5bps) adding 0.04bps to ExHVOL.
The price of investment grade credit rose 0.41% to around 98.39% of par, while the price of high yield credits rose 2.005% to around 81.63% of par. ABX market prices are lower by 0.61% of par or in absolute terms, 1.75%. Broadly speaking, CMBX market prices are lower by 1.72% of par or in absolute terms, 0.54%. Volatility (VIX) is down 3.71pts to 28.92%, with 10Y TSY selling off (yield rising) 1bps to 3.46% and the 2s10s curve flattened by 2.1bps, as the cost of protection on US Treasuries rose 5.49bps to 48bps. 2Y swap spreads widened 0.1bps to 40.75bps, as the TED Spread widened by 4bps to 0.53% and Libor-OIS deteriorated 0.2bps to 45.5bps.
By: Tyler Durdeen