The recent sell-off in European credit markets has provided a swathe of arbitrage opportunities for investors looking to use the correction as an entry point, but some analysts are advising against jumping back into cash bonds just yet. While credit spreads widened across the board, the sell-off was particularly pronounced in the high-yield space as the iTraxx Crossover index pushed out to 299bp on August 8 - its widest level since mid-March. This came after a steady grind in for the index, which had more than halved from a high of 529bp during last year's taper tantrum to a multi-year low of 219bp in June. Volatility has also picked up sharply as the high-yield index has become the go-to credit hedge for many traders, with at the money three-month implied volatility at 61.4% on August 7 compared with 49.6% a month before, according to Bank of America Merrill Lynch strategists.
展开▼
