We noted last month that realised volatility in the European investment grade CDS market, as measured by the Markit VolX index, was at its lowest for two years. By the end of October, volatility had dipped to 18%, which was the lowest level since the heady days of June 2007. A number of future events were mooted that had the potential to trigger market uncertainty, including next month’s Italian referendum.

But a victory for Donald Trump in the US presidential election was viewed by most as a highly unlikely occurrence. Spreads rallied in the run up to the vote, with the Markit CDX.NA.IG tightening from...