Merrill Lynch has started producing a dedicated credit derivatives research product to meet increasing end-user demand for synthetic credit exposure. Chris Francis, head of European and Asian credit research--who is now responsible for credit derivatives research--said the move marks the first time Merrill is regularly pitching default swaps as an investable asset class to clients. "Before we used to do it occasionally when we did a big piece on credit strategy, but a lot more clients are getting involved in the market and a lot more are looking to get involved."
As part of the push, Atish Kakodkar, a European high-yield telecom analyst at Merrill in London, is also now working on credit derivatives research.
The inaugural edition of the piece, dubbed "Protection Strategies," was sent out last Tuesday. It recommends investors sell five-year protection on Fiat at 195 basis points, thus picking up 70 bps over the yield on its 6.125% bonds due in 2008. Merrill also recommends that emerging market investors sell protection on Bulgaria as a more attractive way of gaining exposure to the sovereign than buying the cash bonds, which it says are trading tight for technical reasons.
