Rabobank International is readying the launch of its first synthetic credit structure to feature constant proportion portfolio insurance. Andries Hoekema, exeuctitive director in structured credit in London, said CPPI suits the firm's view on credit risk. "Default rates look to be remaining low in the coming years, but spreads have the potential to widen," he said. "We have formed our CPPI strategy with those factors in mind."
Called Rabo Credit Strategie Obligatie, the long/short, seven-year trade is euro denominated and linked to the investment grade iTraxx and CDX indices. Details of the structure have not been finalized, but Hoekema said the firm chose to trade the indices because they provide greater liquidity. He also noted the advantages of the long/short strategy. "It gives us the flexibility to trade between tranches," he said. The deal, which will also be managed by Rabobank, is being shown to investors primarily in Europe. Hoekema said there is no set target notional or date for close.
