Spreads vs volatility

chart of the month

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The first half of this year has swung from untrammelled optimism in February to the unbridled pessimism witnessed for two months since the middle of March. The correlation-led sell-off in the collateralised debt obligation space exacerbated matters, leaking through into the main credit indices in mid-May. That pessimism prompted investors to visit synthetic credit markets more than their cash cousins, as shown by the chart above, which highlights the performance of the main iBoxx cash bond i

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