Market participants, trading volumes and complex strategies in the loan credit-default swap market have heated up this summer, panelists said. "My personal volumes are three times more [than before ISDA published its LCDS template in June]," said Doug Grossberg, leveraged loan credit derivatives trader at Credit Suisse in New York. Jeff Kushner, managing director at Blue Mountain Capital Management in New York, said he has traded USD300 million in the last three months.
Interest in the LCDS market was reflected in panel attendance and sideline conversations. Several conference attendees, including lawyers and collateralized debt obligation trustees, said they came to learn about LCDS because clients are looking at using LCDS buckets in CDOs.
Grossberg said the popularity of LCDS may lead investment banks to bid more aggressively to underwrite loans, leading to tighter new issue pricing that more closely reflects the LCDS market. LCDS spreads trade about 40 basis points tight to cash loans.
