Growth in the credit-default swap market has slowed, according to the Bank For International Settlements, and credit players have attributed the deceleration to investors becoming more risk adverse. "Investors aren't storming into CDS the way they used to," said one strategist at a European firm in London.
Statistics released by BIS last week, the CDS market increased by one third to GBP13.7 trillion (USD 25.7 trillion) in the second half of last year, compared to an increase of 60% in the six months prior. Volumes, measured by notional amounts outstanding, comprised a 40% boost in single-name trades and just over a 20% rise in index and basket plays.
Another credit official said the pull-back in growth is also a sign the market is maturing. The BIS noted CDS trading is still dominated by inter-bank deals and that no definitive data is available on more exotic credit derivative structures. Structured credit is an area of the market which is growing on the back of the current tight credit spread environment.
