Spreads were mixed in the US today with IG worse, HVOL improving, ExHVOL weaker, XO stronger, and HY selling off. Indices typically underperformed single-names with skews mostly narrower (as index arb remains active) as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL intrinsics beat and narrowed the skew, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.
The names having the largest impact on IG are Alcoa Inc. (-65.71bps) pushing IG 0.51bps tighter, and American International Group, Inc. (+61.61bps) adding 0.29bps to IG. HVOL is more sensitive with Alcoa Inc. pushing it 2.35bps tighter, and American International Group, Inc. contributing 1.37bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Omnicom Group (-24bps) pushing the index 0.24bps tighter, and CSX Corporation (+7bps) adding 0.07bps to ExHVOL.
The price of investment grade credit fell 0.25% to around 96.61% of par, while the price of high yield credits fell 0.25% to around 75.63% of par. ABX market prices are higher (improving) by 0.1% of par or in absolute terms, 0.22%. Broadly speaking, CMBX market prices are lower by 0.09% of par or in absolute terms, 0.27%. Volatility (VIX) is down -0.14pts to 37.62%, with 10Y TSY rallying (yield falling) 7.8bps to 2.78% and the 2s10s curve flattened by 5.4bps, as the cost of protection on US Treasuries fell 6.2bps to 43bps. 2Y swap spreads tightened 0.5bps to 57.75bps, as the TED Spread widened by 1.5bps to 0.97% and Libor-OIS improved 1.1bps to 92.9bps.
The Dollar weakened with DXY falling 0.03% to 84.607, Oil falling $0.76 to $49.29 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 0.93% today (a 1.55% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold dropping $5.3 to $888.55 as the S&P is down (841.9 -1.42%) underperforming IG credits (178bps -0.26%) while IG, which opened wider at 173.5bps, outperforms HY credits. IG11 and XOver11 are +5bps and -1.3bps respectively while ITRX11 is -0.02bps to 154.38bps.
The majority of credit curves flattened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).
Dispersion rose +0.6bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.
58% of IG credits are shifting by more than 3bps and 68% of the CDX universe are also shifting significantly (more than the 5 day average of 62%).
