IG17, the CDX index has been very strong, though it has stabilized at these levels for the past couple of days. The “basis” has become very rich. The index is trading more than 7 bps tighter than the fair value. This is a clear sign that the market has been squeezed and that hedges are coming off but the rally isn’t as deep as you would think. The fact that single name hedges are not keeping pace is a function of reduced liquidity in single names (making it expensive to take off hedges) and limited conviction in the rally.
Closer to cash land, HYG is trading well above intrinsics. HY17, another hedge product has also outperformed cash. The rally, while real, isn’t that deep, so remain careful.