Not a single credit-default swap referenced to investment-grade corporates in any collateralized debt obligation rated by Fitch Ratings defaulted last year, according to a global credit events study the rating agency plans to publish early next month. Synthetic CDOs track record was partly blemished, however, by two asset-backed securities defaulting, according to Shaun Baddeley, senior director in London. This is the first time Fitch has included asset-backed securities in its review of the synthetic CDO market.
"It was a good year and our outlook for 2005 is similar," said Baddeley. CDO performance is being helped by the global recovery and reflects a general increase in the number of upgrades versus downgrades, he added.
The study also looks at the correlation between recovery rates and both the length of valuation and the number of bids. It concludes that higher recovery rates are achieved with longer valuation periods.
