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Derivatives

Hopes For Japan CPPI Heat Up

Credit derivative houses in Japan are preparing for a flurry of credit products using constant proportion portfolio insurance this quarter.

Credit derivative houses in Japan are preparing for a flurry of credit products using constant proportion portfolio insurance this quarter. Credit sales pros have been doing the rounds with clients to explain the product and expect to see demand now investors understand the capital protection mechanism.

"This market will take off exponentially this year [because] clients are attracted to the high returns and ratings," predicted a senior credit marketer at a European house in Tokyo. The product is targeted at investors holding Japanese government bonds and looking for higher returns coupled with principal protection. End users that were shown the product last year have been getting internal approvals and systems in place for the effort and should begin closing deals shortly, said the marketer. The CPPI-linked deals will likely be linked to iTraxx index tranches and sold in yen.

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