Asset-backed securities traders expect the launch of the ABS index's second series last week to trigger trading from new accounts. Dealers wouldn't put numbers on their forecast, but said there is significant new interest, mostly from macro hedge funds.
"A lot of new accounts have just been waiting for the last six weeks," said one New York trader, explaining some potential customers had held off to avoid any complications from the roll, even though the transition was widely expected to be smooth.
The first day of trading on the second series, ABX.HE.06-2, saw strong outright trading volume on both indices. Absolute volumes could not be determined and dealer estimates ranged from USD1 billion to USD9 billion across the product. Inter-dealer brokers saw under USD1 billion in volume and just a handful of roll trades, in which positions in the first index are closed and re-entered to reference the second.
Traders said accounts felt no rush to roll positions from the first series because both indices are likely to remain liquid. Unlike corporate credit indices CDX and iTraxx, each ABX index includes entirely different names from other series and so should be actively traded even off-the-run.
