Appetite for leveraged super senior tranches of collateralized debt obligations continues unabated, especially if the structures are tailored for the investor. In spite of value being squeezed from the play, dealers are still arranging transactions on a bespoke basis for clients who are comfortable with leveraged tranches returning around 40 basis points for a seven-year tenor.
One European buyside official said his firm, which controls around EUR2 billion in synthetic investments, is considering investing in its first leveraged super senior tranche this quarter. "They are a safe bet," he noted.
"It was an effort for structurers to get people familiar with the product, but now they are happy with it they will keep doing it," said one credit structurer, adding his firm is arranging a handful of deals on the back of reverse inquiries.
