Three months after launching its high-yield credit-default swap index, JPMorgan has added BB and B-rated tranches. The BB tranche offers a fixed 8.625% coupon on a basket of 55 names, while the B-rated tranche offers a fixed 9.875% coupon on 44 names, according to an official at the firm. He added that the move to include the tranches on the index was made to meet investor demand for more targeted risk exposure to the market. He declined to comment further.
Traders at rival firms, many of whom have been using the index, dubbed HYDI-100, are enthusiastic about the additions. "I think it's great. I've been using the HYDI index for the last few months. This just adds to its appeal because it gives us added risk exposure," said one trader.
HYDI-100 is offered as a funded product with a fixed coupon of 9.4% and a five-year maturity or as a swap with a fixed fee of 520 basis points with a five-year maturity (DW, 11/12). The product is correlated to traditional high-yield bond indices and allows clients to both invest and hedge their exposure to the U.S. high-yield market through the use of high-yield credit derivatives.
