The great thing about having premium subscribers is that occasionally when you come across RAW unfiltered market gossip, you can publish it in a discrete but still timestamped manner.
The below is not verified.
The gossip pertains to the fact that the credit derivative markets are feeling the presence of a new and potentially very distressed London whale in their midst.
The original 2012 London whale, Bruno Iksil, a credit default swap trader at JP Morgan’s chief investment office, was only exposed when a couple of hedge funds began to detect a significant footprint in the market.
As the Wiki reads:
In February 2012, hedge fund insiders such as Boaz Weinstein of Saba Capital Management[10][11] became aware that the market in credit default swaps was possibly being affected by aggressive trading activities.
The anomalies were first sighted in the CDX HY index tranche.
This time around the footprint is being felt in the main iTraxx Crossover as well as the series 30:
As Bloomberg reported on Thursday:
A gauge measuring risk on European junk bonds crossed the threshold of 600 basis points for the first time since April 2020, as central bankers reiterated concerns over inflation.
The iTraxx Crossover, which tracks the cost of insuring European high yield bonds, jumped to as much as 605 basis points on Wednesday, reaching its highest level since April 2020, according to CBBT pricing compiled by Bloomberg. The move came after central bankers meeting in Portugal contemplated the new policy play-book which might be required in a new world of surging prices.
The market talk is that two prominent dealers are “captive” to the trade and with liquidity disappearing things are set to get uglier before they get better.
One specific name is also doing the rounds, but until it’s verified we will keep mum. 🤐 (Cough, cough, Hl)
We will update this story as and when we get more info.
