Financial markets have started to take notice of the diverging interests of creditors and equity holders. There was a time when stocks and credit indices seemed to move in tandem. But lately that hasn't been the case.
The Dow Jones CDX Investment Grade (IG7) index rolled to the current series on March 20 (IG8 deal spread 35 basis points). More than a month has gone by, but the IG8 index is still stuck at around 35bp (see chart 1). In the meantime, the Dow rose 6.6% to a new intra-day high of