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Derivatives

Japanese CMCDS Market To Emerge

A constant maturity credit-default swap market is expected to develop in Japan as firms look for alternatives to plain vanilla products in the persistent tight-spread environment.

A constant maturity credit-default swap market is expected to develop in Japan as firms look for alternatives to plain vanilla products in the persistent tight-spread environment. "[Trading] should start in the next few months, as nothing is happening in the pure CDS market," said an official at Shinsei Bank adding, "We're looking forward to trading such products."

A senior credit structurer at a bulge bracket house said, "It's a very promising product that hasn't yet lived up to its potential. Spread-based products have a real application and I expect this to take off." Clients are becoming more aware of constant maturity structures, which have gained ground in the U.S. and Europe. A few initial deals have been completed in Japan, but a fully-fledged interdealer market will take several months to develop.

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