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Derivatives

Daiwa Plans CDOs On Overseas Credits

Daiwa Securities SMBC is preparing to structure synthetic collateralized debt obligations referenced to U.S. and European credits for its domestic clients.

Daiwa Securities SMBC is preparing to structure synthetic collateralized debt obligations referenced to U.S. and European credits for its domestic clients. "CDOs with foreign company credit will offer much higher yield," said an official at the firm, noting that the persistent tight level of spreads on domestic credits is prompting market participants in Japan to look outside their home market. This would be the first such deal for Daiwa. Daiwa will likely launch in the first quarter.

The move is in keeping with a recent Moody's Investors Service report, which showed a drop in volume for Japanese CDOs because of investors switching to more lucrative markets (DW, 11/29).

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