Credit market ricochet

The run-up to the March roll of the iTraxx and Dow Jones CDX indexes saw an intense burst of trading activity as spreads widened sharply. Popular index trading strategies fell by the wayside, while new players such as CPDOs entered the market. How did the trading volatility affect the dynamics of the indexes? Navroz Patel reports

The roll of the major credit default swaps (CDSs) indexes at the end of last month was eyed keenly by credit derivatives traders and analysts. The March 20 roll, when new series for most of the indexes were launched, was the first to occur since the majority of constant proportion debt obligations (CPDOs) were issued last year. Although dealers estimate that only around $5 billion-10 billion of CPDOs have been placed since ABN Amro unveiled the first deal in July 2006, some argue that these