All hail relative value

Regulatory overhaul might form the backdrop to the credit derivatives market, but in its shadow traders are going about the daily business of making and losing money. There’s no mistaking the two major themes in the market: liquidity and volatility

Violent swings in spreads – particularly in credit derivative indexes – reflect not only the swirl of concerns around peripheral European sovereigns, banks and weak economic growth, but issues surrounding market liquidity. According to market participants, while liquidity passes muster in the US, the European market is feeling the strain.

“Liquidity is markedly reduced in Europe,” says Stephen Siderow, New York-based president of hedge fund BlueMountain Capital, which runs relative value credit