As the results of the presidential and congressional elections could influence corporate profits, several banks are reportedly preparing their U.S. credit trading operations to handle increased activity. JPMorgan Chase (JPM, Financial) is staffing its derivatives trading desk throughout the night for CDX trading, according to an investor notice. Sources indicate that Citigroup, Royal Bank of Canada, and BNP Paribas have similarly informed investors about their operational readiness in derivative trading. All four banks have declined to comment on the situation.
Last month, Barclays advised investors to purchase credit derivative protection before the elections to hedge against potential widening of spreads. The bank specifically recommended buying investment-grade or high-yield CDX to manage recent volatility.
According to a report by JPMorgan strategist Eric Beinstein, despite significant fluctuations in polls and interest rates, credit spreads have remained stable over the past four weeks. Strong technical factors are currently driving credit spreads, and these are unlikely to be altered by the election outcomes.
