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Derivatives

BoTM To Enter CDO Mart

The Bank of Tokyo-Mitsubishi is planning to issue synthetic collateralized debt obligations next year for the first time in light of growing investor demand. "Hopefully within six months but definitely within a year," said Nobukazu Saeki, manager of the derivatives and structured products division at BoTM in Tokyo. "We're talking to the market about this." He continued that investors are now showing demand in CDOs solely linked to Japanese credits, such as the recent issuance by BNP Paribas (DW, 11/17).

However, Saeki noted that until credit-default spreads in Japan widen, perhaps within six months, it will be difficult to structure a CDO that provides sufficient return to compensate for the risk involved in investing in the junior and equity tranches. "Unless spreads widen further, it would be difficult to sell these tranches," said Saeki. He added that CDOs would likely have be issued at a minimum size of JPY10 billion (USD79.4 million).

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