The first European synthetic leveraged loan index launched stronger than expected last week, boosting single-name loan credit-default swap trading volumes. Traders said EUR300-400 million traded on the iTraxx LevX senior index its first day. Single-name volumes were about three to four times more than normal.
Traders said it is too early to tell if the activity was just initial interest or if it will last. Hedge funds are expected to jump into relative value and capital structure arbitrage trades between the LevX and iTraxx cross-over index as one of the first plays in the new market.
The iTraxx LevX Senior Series 1 Version 1 index references the 35 most liquid first-lien LCDS contracts, of which 17 overlap with the cross-over. A second-lien index will follow in two weeks and also will have names that overlap. The index is managed by Barclays Capital, Credit Suisse, Deutsche Bank, Dresdner Kleinwort, Lehman Brothers and Morgan Stanley along with International Index Co.
