# Credit Indices > Credit indices track baskets of credit default swaps or bonds. Learn how CDX and iTraxx work, rolls, index tranches, bond indices and how traders use them. Source: https://learn.tradelabsai.com/bonds-credit/credit-indices/ Track: Bonds, Rates and Credit · Level: Advanced · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Credit Indices", https://learn.tradelabsai.com/bonds-credit/credit-indices/ Credit indices let investors trade or hedge the credit risk of a broad group of companies in one transaction. The most traded are CDS indices, CDX in North America and iTraxx in Europe and Asia, which bundle credit default swaps on 100 or 125 companies. Bond indices, such as the Bloomberg US Corporate Index and ICE BofA indices, track the performance of corporate bond markets and serve as benchmarks for funds. Credit indices are watched as real time gauges of credit market stress. ## CDS indices | Index | Coverage | Number of names | |---|---|---| | CDX North America Investment Grade (CDX IG) | Investment grade North American companies | 125 | | CDX North America High Yield (CDX HY) | High yield North American companies | 100 | | iTraxx Europe (Main) | Investment grade European companies | 125 | | iTraxx Crossover | European high yield and crossover companies | About 75 | | iTraxx Asia ex Japan, iTraxx Japan, CDX Emerging Markets | Other regions | Various | The indices are administered by S&P Dow Jones Indices (CDX) and S&P (iTraxx, formerly Markit). Each name usually has an equal weight. ## How an index CDS works Trading an index CDS is like trading CDS on all the companies at once: - **Buying protection:** pay the index coupon; receive compensation if any company in the index has a credit event (proportional to its weight). - **Selling protection:** receive the coupon; take on the credit risk. Investment grade indices are usually quoted as a spread in basis points; high yield indices are quoted as a price, such as 104.5, around a fixed coupon. See [Credit Default Swaps (CDS)](https://learn.tradelabsai.com/bonds-credit/credit-default-swaps/). **Example: Hedging a bond portfolio with CDX IG** A fund holds $200 million of investment grade bonds and fears a widening of spreads. It buys $200 million of 5 year CDX IG protection at a spread of 60 basis points. If market stress pushes the index to 110 basis points, the index protection gains roughly 50 basis points × duration (about 4.5) × $200 million ≈ $4.5 million, offsetting much of the loss on the bonds. The hedge is imperfect because the fund's bonds are not the same as the index names. ## Rolls and series CDS indices roll every six months, in March and September. A new series is launched with an updated list of companies, removing those that have been downgraded (for investment grade indices) or have become illiquid. Most trading moves to the new "on the run" series. Older series continue to trade with their original names. See [Rolling Futures Contracts](https://learn.tradelabsai.com/futures/rolling-futures-contracts/) for the similar idea in futures. ## Index tranches Index tranches split the credit losses of an index into slices, such as 0% to 3%, 3% to 7% and so on. Equity tranches absorb the first losses; senior tranches are hit only after large losses. Tranche prices depend on default correlation, the same concept that was mispriced in mortgage CDOs before 2008. See [Default Probability and Recovery Rate](https://learn.tradelabsai.com/bonds-credit/default-probability/). ## Bond indices | Index family | Examples | Use | |---|---|---| | Bloomberg | US Aggregate, US Corporate, US High Yield | Benchmarks for bond funds | | ICE BofA | US Corporate, US High Yield, Euro indices | Widely cited spread data | | JP Morgan | EMBI (emerging market bonds), CEMBI | Emerging market benchmarks | Bond index spreads, such as the ICE BofA US High Yield option adjusted spread, are widely used to track credit conditions. See [Credit Spreads](https://learn.tradelabsai.com/bonds-credit/credit-spreads/). ## How traders use credit indices - **Macro hedging:** buy protection to hedge credit or equity portfolios in a downturn. - **Expressing views:** sell protection to gain broad credit exposure. - **Relative value:** investment grade vs high yield, North America vs Europe, index vs single names (the index "skew"). - **Signals:** sharp moves in CDX HY or iTraxx Crossover often accompany equity selloffs. ## Risks - **Basis risk** between the index and a specific portfolio. - **Jump risk** from defaults of index members. - **Liquidity** in off the run series and tranches. - **Correlation risk** in tranches. ## Frequently asked questions ### What are CDX and iTraxx? Credit default swap indices that bundle CDS on 100 to 125 companies in North America (CDX) and Europe or Asia (iTraxx), letting investors trade broad credit risk. ### How often do credit indices roll? CDS indices launch a new series every six months, in March and September, updating the list of companies. ### What is a credit index used for? Hedging credit portfolios, taking broad credit views, relative value trades and tracking credit market conditions. You have finished the Bonds and Credit track. Continue with commodities, starting with [Commodity Market Fundamentals](https://learn.tradelabsai.com/commodities/commodity-market-fundamentals/). ## Continue learning - Previous lesson: [CLOs](https://learn.tradelabsai.com/bonds-credit/clos/) - Related: [CLOs](https://learn.tradelabsai.com/bonds-credit/clos/): A CLO pools leveraged loans and splits the cash flows into tranches from AAA to equity. Learn how CLOs work, the waterfall, coverage tests and the risks. - Related: [Credit Default Swaps (CDS)](https://learn.tradelabsai.com/bonds-credit/credit-default-swaps/): A credit default swap is insurance like protection against a borrower defaulting. Learn how CDS work, spreads and upfront pricing, credit events, uses and risks. - Related: [Credit Spreads](https://learn.tradelabsai.com/bonds-credit/credit-spreads/): A credit spread is the extra yield a risky bond pays over a safe benchmark. Learn how spreads are measured, what drives them and what they signal about risk. - Related: [Investment Grade vs High-Yield Bonds](https://learn.tradelabsai.com/bonds-credit/high-yield-bonds/): High yield bonds are rated below investment grade and pay higher interest for higher default risk. Learn how they behave, default cycles, spreads and how to invest. - Related: [What Is an Index?](https://learn.tradelabsai.com/markets/what-is-an-index/): A market index tracks a group of assets with one number. Learn how indexes like the S&P 500 and Dow are built, weighting methods and how traders use them. - Related: [Hedging](https://learn.tradelabsai.com/markets/hedging/): Hedging means taking a position that offsets the risk of another. Learn how hedges work with options, futures and correlated assets, their costs and limits.