Introduction
The year 2024 unfolded against a backdrop of monetary policy recalibration and evolving market dynamics. Following the U.S. Federal Reserve's aggressive rate hiking cycle through 2022 and early 2023, the central bank pivoted to easing in late 2024, delivering three consecutive rate cuts totaling 100 bps from September through December, bringing the federal funds rate to a target range of 4.25%-4.50%. This shift toward accommodation, combined with resilient economic growth, created a generally supportive environment for credit markets throughout 2024.
Credit index spreads remained compressed through most of 2024, reflecting the benign market environment. The CDX North America Investment Grade index traded in a tight range around 50 bps for much of the year, while the CDX North America High Yield index compressed to near 289 bps in early December. European credit indices showed similar stability, with the iTraxx Europe index finishing 2024 at 58 bps and the iTraxx Europe Crossover index at 313 bps.
The first half of 2025 brought significant changes to credit markets. Rising tariff uncertainties and geopolitical tensions contributed to market unease, culminating in extraordinary volatility during April 2025. Credit spreads widened sharply, with the CDX North America Investment Grade index reaching 80 bps, and the CDX North America High Yield index spiking above 475 bps. This volatility surge catalyzed exceptional trading activity across fixed income index products, with many segments posting record or near-record volumes, as market participants sought to adjust exposures and hedge credit risk more aggressively.
The sharp uptick in H1 2025 volumes was observed across nearly all product types—from CDS indices and options to ETFs and futures—underscoring the role these instruments play as market pressure valves during periods of uncertainty. This report examines the trading volumes of key index-linked credit products through full-year 2024 and into the first half of 2025, highlighting how these instruments continue to serve as the primary conduits for credit market access during both calm and volatile periods.
Credit Spreads and Volatility
Credit markets in 2024 demonstrated remarkable resilience, with index spreads remaining compressed for much of the year despite elevated interest rates. The CDX North America Investment Grade index began 2024 at 58 bps and traded in a relatively tight range, reaching lows near 47 bps by mid-December, before ending the year at approximately 50 bps. Similarly, the iTraxx Europe index started the year at around 62 bps and compressed to 58 bp by year-end 2024, reflecting the supportive credit environment.
High yield credit markets showed even more pronounced tightening. The CDX North America High Yield index began 2024 at 364 bps and compressed steadily throughout the year, reaching lows near 289 bp by December. The iTraxx Europe Crossover index followed a similar pattern, albeit with a more muted tightening, declining from 326 bps at the start of the year to around 314 bps by year-end 2024.
The launch of the Credit VIX® indices in October 2023 provided new transparency into market expectations for credit volatility. Through most of 2024, these indices registered relatively benign volatility expectations. The CDX/Cboe NA Investment Grade 1-Month Volatility Index averaged 26 bps of implied volatility for the year, while the CDX/Cboe NA High Yield 1-Month Volatility Index averaged 131 bps. The European Credit VIX indices showed similar patterns, with the iTraxx/Cboe Europe Main 1-Month Volatility Index averaging around 30 bps.
However, the calm of 2024 gave way to renewed volatility in early 2025. By April 2025, credit spreads had widened dramatically: the CDX North America Investment Grade index reached 80 bps, while the CDX North America High Yield index spiked to over 475 bps during the peak volatility period. European markets experienced similar stress, with the iTraxx Europe index reaching 112 bps, while the iTraxx Europe Crossover index approached 430 bps.
