Tyler at Zero Hedge has an excellent post about index basis trades—arbitraging the differences in pricing between CDS indices and their single-name constituents—and how the IG11 index basis (or "skew") has exploded negative ever since Lehman. As Tyler notes, three IG11 constituents are trading on a points upfront basis, and considering that the IG11 is trading 46bps wide to the deal spread, that makes it pretty expensive to put on an index basis trade. (We'll ignore the irony of three constituents in an "investment grade" index being so distressed that they're trading on a points upfront basis.) It's also worth noting that the investment grade CDS index curves in both Europe and the US are severely inverted, and have been for a few months. Here are the spreads for the iTraxx Europe index:
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