OK, it is a week or so since it happened but for my own book-keeping I want to blog on the fact that the first company in one of the more important iTraxx Europe CDS indexes has defaulted! The bankrupt petrochemical company LyondellBasells CDS was one of 50 speculative-grade CDS included in the iTraxx Crossover index. This index is one of the two most quoted iTraxx indexes, together with iTraxx Europe, and it has traded at very elevated levels, sometimes above 1000bp, for some time now.
The credit crisis continues, in other words, and it is probably not a very bold statement to claim that soon one of the 125 iTraxx Europe investment-grade firms will probably default as well. It is clear that the crisis has reached the corporate sector and not only financials are living on the edge these days. BTW, the day of the reckoning is approaching for GM, and GM is included in iTraxx Europe, and…….