Liquidity in the Asian credit-default swap market has jumped on the back of the Dow Jones iTraxx Asia launch in July (DW, 7/11). Increasing synthetic collateralized debt obligation issuance has also aided the boost in liquidity. A trader at a major house said internal volumes are up about 40% since the start of the year. Richard Cohen, Asia-Pacific credit derivatives trader at Morgan Stanley in Hong Kong, said, "It seems that activity from structured credit desks has picked up."
One of the strategies the index has spawned is relative-value arbitrage by the hedge fund managers. For example, hedge funds have been buying protection on the iTraxx Asia index and selling protection on individual credits in the region. One trader attributed a lot of the extra volume to overseas players stepping into the Asian market.
On the CDO side, more global portfolios are starting to include Asian names. One such deal is being structured by Calyon (DW, 9/6).
