Credit structurers have recently started showing leveraged super-senior tranches on portfolios of Japanese credit, a market they expect to emerge in the coming months. The deals have already found takers in Europe (DW, 5/27) and BNP Paribas and JPMorgan, among others, are looking at rolling out similar structures in Japan.
"Until recently a lot of investors in Japan have been sitting on the sidelines following correlation smile re-pricing, but we see more demand as the pricing becomes attractive," said Shun Cajot Yoshida, credit structurer at BNP Paribas in Tokyo. Yoshida explained the recent steepening in the correlation curve has put a premium on super-senior tranches. "We're looking to launch this in the next few weeks--we're hoping that it will be the first in the market," added Yoshida. "This should work here," concurred a credit marketer at another European house. Officials close to JPMorgan said the firm is also eyeing such deals.
"We're starting to see inquiries," said Yusuke Seki, v.p. and senior credit officer in the structured finance group at Moody's Investors Service in Tokyo, noting he expects a few initial deals to hit the market this quarter. The ratings agency will use the same model to analyze such deals as it employs in Europe and the U.S. As default risk in a super-senior structure is limited, the ratings agency focuses on the movement of credit spreads, modeling ratings movements of the credits and overall portfolio.
