Activity for longer-dated credit-default swaps in Australia is on the rise, due to the growing number of local accounts looking for yield in the tight-spread environment. "Liquidity in the back-end of the market has definitely picked up," said a dealer at a major domestic bank in Sydney.
Officials said as more domestic funds have been getting mandates in place, coupled with offshore CDO issuance incorporating Aussie names, interest for seven and 10-year trades has been picking up steadily. A credit official at a bulge-bracket house noted that given the tight level of spreads in Australia and lower volatility than Asia, U.S. or Europe, investors have been looking for ways to pick up yield. "Investors and local banks are getting more comfortable moving down the curve," he said.
