Monolines are still looking to get into the growing asset-backed securities credit-default swaps market, but are struggling to reconcile their CDS ABS document with that of the dealer community. The insurers have been sidelined from the market since insisting on using a document form other counterparties will not agree to.
Monoline officials admitted their form has not been used, but maintained they could not trade on the widely-used dealer form. "A lot of trades are happening [on ABS CDS] and monolines are not participating," said Stephen Murray, director at MBIA. "It begs the question: who is sourcing super senior protection?" Banks appear to be doing it themselves by leveraging super-senior ABS tranches (DW, 2/17), he and other traders said. "It will be interesting to see what will happen in the long run without monoline participation," Murray added. "There's too much capital, too much trading for monolines not to be involved in synthetics."
