Credit market investors sold bonds and bought default protection in recent days, reflecting negative sentiment around stocks, commodities and the global economy. However, there was a distinct absence of panic, traders said, with volatility remaining relatively subdued. Implied at-the-money volatility on the investment grade iTraxx Europe index was quoted as low as 54% last week, some six percentage points wider on the week and two percentage points wider over the past month. February and March implied vols were little changed, trading 4% below the front-month contracts. That is in stark contrast to the height of the Greek crisis, when three-month volatility was trading 20% below the one-month, amid concern over an imminent sovereign default.
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