“What we have been doing in the last number of years is utilizing credit derivatives to gain credit exposure, in addition to the cash bonds we already own,” Michael Temple, head of corporate credit research at Amundi Pioneer, told MarketWatch. “The index derivative market is so much more liquid than cash bonds these days.”
See: Legendary bond investor: When trade war escalates, stay away from this corner of the market Trading in credit default swap indexes by notional value have increased since 2016, according to ISDA, the trade organization for derivatives. The overall value of trading in the high-yield investment-grade credit default swap indexes rose by around 3% to 4% in the second-quarter of 2019 from the comparable period last year. It’s unclear, however, how much of this activity is driven by market participants looking to manage liquidity in their portfolios.
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