Crossover hedged and wedged

摘要

Dealers and investors who hedged bond portfolios using the iTraxx Crossover index got a nasty surprise last week after a mismatch between cash and derivative markets left holders of inventory nursing heavy losses. The Crossover index skew moved from positive 15bp to minus 15bp over two trading days, amid shifting sentiment on the chances of a positive outcome in Greece's negotiations with its creditors. However, bonds remained relatively unmoved. "It was a classic case of hedge and wedge," said Antoine Cornut, CEO of hedge fund Camares Capital. "The index tightened against CDS and cash, and as people tried to unwind their hedges they suffered."