LIVE MARKETS-Soaring CDS volumes suggest more hedging than selling

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

SOARING CDS VOLUMES SUGGEST MORE HEDGING THAN SELLING

Volumes in credit derivatives have soared even though credit spreads have widened only modestly, suggesting that investors are hedging but not selling their corporate debt holdings, Brian Reynolds, chief market strategist at Reynolds Strategy, said on Friday in a report.

“New issuance of credit has stopped in the last few days. It has not been a panicky selloff as spreads have only widened by a small amount, nothing like the surges of 2020 or 2016,” he said.

“However, the volume of credit derivative flows has surged to a record," Reynolds added. "We have never seen this combination of high volume and low spread movement."

The options adjusted spread on the ICE BofA US Corporate Index .MERC0A0 reached 106 basis points on Friday, the widest since August 2024. It had traded at around 400 basis points in March 2020 and was more than 200 basis points in 2016.

“Credit investors seem to be seeking protection while not actively selling as they try to figure what impact tariffs will have,” Reynolds concludes.

(Karen Brettell)

FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:

CHIP INDEX PLUNGES 40% FROM INTRADAY RECORD - CLICK HERE

U.S. STOCKS PARE LOSSES; POWELL EMPHASIZES ECONOMIC UNCERTAINTY - CLICK HERE

OH, WAS PAYROLLS THIS MORNING? A JOBS REPORT DEEP DIVE - CLICK HERE

MOST PESSIMISM SINCE FINANCIAL CRISIS BEAR WAS ENDING - AAII - CLICK HERE

U.S. STOCK FUTURES RATTLED AFTER CHINA RETALIATORY TARIFFS, PAYROLL DATA - CLICK HERE

DON'T FORGET ABOUT PAYROLLS - CLICK HERE

BANKS LEAD EUROPEAN SHARES LOWER, STOXX SET FOR BIGGEST WEEKLY FALL IN THREE YEARS - CLICK HERE

EUROPE BEFORE THE BELL: FUTURES EDGE DOWN AFTER THURSDAY'S SHARP SELL-OFF - CLICK HERE

WALL STREET HAS MOST TO LOSE FROM TRUST LOST - CLICK HERE