The euphoric markets that we enjoyed before the credit crunch are probably as unrealistic as the markets that confronted us in the 12 months after the onset of the crunch.
Where things settle down are probably somewhere in between. Where are we now and where have we been? Let us look at the two main indices that credit portfolio managers and traders follow in Europe; ITRAXX Main and ITRAXX Cross Over. The ITRAXX Main is an index comprising 125 of the most liquid issuers in the investment grade credit universe and in July 2007 (onset of the crisis) traded anywhere between 25 and 65 bps over the risk free rate. It touched a wide level of 285bps in March 2009 and is back in at 83bps (as at 26/10/09). The ITRAXX Cross Over is an index comprising 40 of the mo...
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