Spreads were tighter in the US today as all the indices improved (and curves steepened with shorts getting squeezed at the mid to short-end). Indices typically underperformed single-names with skews mostly narrower as IG underperformed but narrowed the skew, HVOL outperformed but widened 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 Macy's, Inc. (-47.5bps) pushing IG 0.36bps tighter, and CIT Group Inc (+127.41bps) adding 0.7bps to IG. HVOL is more sensitive with Macy's, Inc. pushing it 1.66bps tighter, and CIT Group Inc contributing 3.21bps to HVOL's change today. The less volatile ExHVOL's move today is driven by both Fortune Brands Inc. (-27.5bps) pushing the index 0.28bps tighter, and United Parcel Service Inc. (+4.5bps) adding 0.05bps to ExHVOL.
The price of investment grade credit rose 0.22% to around 96.78% of par, while the price of high yield credits rose 1.6% to around 76.13% of par. ABX market prices are higher (improving) by 0.02% of par or in absolute terms, 0.07%. Broadly speaking, CMBX market prices are higher (improving) by 0.19% of par or in absolute terms, 0.49%. Volatility (VIX) is down -0.33pts to 37.37%, with 10Y TSY selling off (yield rising) 6.5bps to 2.99% and the 2s10s curve steepened by 4bps, as the cost of protection on US Treasuries rose 0bps to 45bps. 2Y swap spreads tightened 2bps to 60.75bps, as the TED Spread tightened by 1.7bps to 0.98% and Libor-OIS improved 1.8bps to 87.2bps.
The Dollar weakened with DXY falling 0.87% to 84.769, Oil rising $1.72 to $51.34 (outperforming the dollar as the value of Oil (rebased to the value of gold) rose by 2.47% today (a 2.6% rise in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $8.75 to $913.05 as the S&P rallies (858.2 1.12%) outperforming IG credits (174.75bps 0.23%) while IG, which opened tighter at 180bps, underperforms HY credits. IG11 and XOver11 are -4bps and -21.01bps respectively while ITRX11 is -3.92bps to 150.5bps.
The majority of credit curves steepened as the vol term structure flattened with VIX/VIXV rising implying a more bullish/less volatile short-term outlook (normally indicative of short-term spread compression expectations).
Dispersion rose +5.7bps in IG (as differentiation remains a theme). 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.
