GS Biswas In Spotlight EUR IG cash cds basis at 1 year wides 8 Sep 2026

GS Biswas - In Spotlight EUR IG cash cds basis at 1 year wides 8 Sep 2026 Avishek Biswas · Goldman Sachs · Credit MarketStrats Tue 8 Sep 2026, 5:09am ET

Differential between EUR IG cash G-spread and iTraxx Main spread is presently screening at the widest level looking over the past 1y history (adjusted for the iTraxx roll jumps). While headline level credit spreads have been recently rangebound, IG cash (across both US and Europe) has been trading heavy relative to synthetics. In my view while the September supply is a real technical to factor in, it seems to be already priced in (to a decent extent) looking at August price action of EUR IG cash vs iTraxx Main. And unless rates see a severe sell-off, I would expect EUR IG cash to be well supported for now given the all- in yield levels (now screening not too far off the highest levels over the past 10y).

From here, I like running expressions of long risk EUR IG cash vs short risk iTraxx Main (with a recommended holding period of 2 months). Two common pushbacks against running long basis (long cash – short iTraxx) trades during this time of the year are the September supply and the iTraxx roll. So below are 2 stats to consider:

Looking over the past years, from the beginning of September over to the subsequent 2 months, EUR IG cash has historically outperformed iTraxx Main (except in 2022) – refer to the charts below.

Moves in cash-cds basis (EUR IG cash G-spread minus iTraxx Main spread) between 01st Sep and 31st Oct over the past years

Looking over the past years, the 1y percentile (and 6m percentile) of IG basis (= cash G-spread minus iTraxx Main spread) entering the month of September is highest for the current year (refer to the table below).

1y and 6m percentiles of IG basis (cash G-spread minus iTraxx Main spread entering September). 2026: 1y 100%, 6m 100%. 2025: 12% / 23%. 2024: 50% / 93%. 2023: 69% / 70%. 2022: 92% / 85%. 2021: 83% / 100%. 2020: 58% / 17%. 2019: 56% / 68%.

Buy LXY Futures /170.70 vs buy iTraxx Main S45 index protection /51.92

The above refers to Dec expiry futures with the strike pricing around ESTR – 30cents of funding (investor pays). So investor benefits from the -ve 30cents in the funding leg. The LXY futures references the RECMTREU Index (available on BBG) which has a spread-to-benchmark of around 82.5bps.

Buy GSLCI100 (EUR IG 100) bond basket on swap @ mids-1.5bps vs buy iTraxx Main S45 index protection /51.92