Bond-CDS basis keeps investors interested

Difference between cash bond spreads and derivatives tightens but still offers value, dealers say

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Investors have continued to take advantage of differences between cash bonds and their derivatives, dealers say, as the basis remains high after its historic blowout amid March’s volatility.

The bond-CDS basis measures the difference between a bond’s credit spread and the spread of the comparable credit default swap. With the basis on both investment-grade and high-yield debt reaching record levels in March, investors could buy the bond and corresponding credit protection, wait for the basis to