SRTx mirroring SRT market developments

SCI launched the SRTx (Significant Risk Transfer Index) 12 months ago with the aim of providing market participants more insight into the arcane world of SRT. The SRTx is a suite of indexes covering the EU and US regions, comprising a spread index that estimates generic new-deal pricing levels based on a ‘benchmark deal’ and a set of market sentiment indexes for volatility, liquidity and credit risk (SCI 3 March 2023). One year on, it is clear that the benchmark’s directional correlations have generally mirrored overall SRT market developments.

The monthly SRTx fixings have tracked key idiosyncratic movements since inception in March 2023. For example, a spike in the SRTx Volatility Indexes (a higher number indicates increased risk) was recorded across the board in November 2023 – following the outbreak of conflict in the Middle East (SCI 2 November 2023) – before dropping back down the month after.

Year-on-year, the SRTx CORP EU and SRTx CORP US spread indexes (covering large corporate SRT) have tightened, while the SRTx SME EU and SRTx SME US indexes (covering SMEs) have widened. Notably, the SRTx CORP US index tightened by 468bp over the 12-month period, reflecting improving sentiment in the broader US credit market.

Meanwhile, the sentiment indexes have overwhelmingly improved, with nearly all indexes declining to 50 or below (below 50 indicates a better outlook), again reflecting improving sentiment in the broader credit market. The SRTx Liquidity Indexes all now stand well below 50, with the SRTx CORP LIQ US index seeing the greatest improvement within that segment, moving lower by 20 points.

The SRTx CORP RISK US and SRTx SME RISK US indexes saw the greatest improvement overall, reporting a 31-point and 25-point reduction in their levels respectively. The outlier for the sentiment indexes is SRTx CORP VOL EU, which posted a six-point increase in its level, indicating a slight worsening in outlook for the segment.