Spreads Edge Wider After CDO Pipeline Tightening

© 2025 GlobalCapital, Derivia Intelligence Limited, company number 15235970, 4 Bouverie Street, London, EC4Y 8AX. Part of the Delinian group. All rights reserved.

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement | Event Participant Terms & Conditions

Spreads Edge Wider After CDO Pipeline Tightening

The price of credit protection has started to widen again now that the synthetic collateralized debt obligation pipeline has dried up. Credit spreads have been tightening for the past month, but traders are now saying spreads are too tight and they are snapping up protection. Separately negative credit news is also leading to widening spreads.

Five-year default protection on credits such as Allianz and Bertelsmann, which are popular names for CDOs, tightened substantially in prior weeks, but have widened slightly due to negative corporate news, traders said. Firms selling protection ahead of the launch of CDOs had narrowed protection on Bertelsman to 140bps from 220bps between late October and the middle of November and caused protection on Allianz to tighten to 60bps from 120bps in the same period. But Bertelsmann's indication that it still needs to tap the capital markets for financing caused investors to purchase protection again, pushing spreads out to 150bps-170bps from 140bps, a trader said. Protection on Allianz widened out to 100bps from 60bps after it announced a third quarter net loss two weeks ago.

Related articles

Gift this article