Credit Options Stutter On Fat Spreads, Illiquidity

Growth in the European credit options market is stagnating this year because a combination of wide bid/offer spreads and a lack of liquidity deterring new players using the instruments to hedge investments.

  • 03 Mar 2006
Email a colleague
Request a PDF

Growth in the European credit options market is stagnating this year because a combination of wide bid/offer spreads and a lack of liquidity deterring new players using the instruments to hedge investments. Traders say long-only and bond-fund managers are yet to enter the market in large numbers. "It's a chicken and egg situation," said one official, noting these funds are needed to inject liquidity and drive down prices. He speculated funds could use credit options to buy protection on portfolios up to EUR3 billion in size.

Traders declined to name specific bid/offer spreads or where they should be trading because they can differ considerably between dealers, but all agreed they appear inflated. At present, activity in credit options is dominated by directional investors who use options to take bets on the iTraxx indices. Last year there were also trades on single names in Europe, but this has dried up because players have shied away from carrying the short side (DW, 1/6).

  • 03 Mar 2006

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 241,977.38 927 8.19%
2 JPMorgan 223,817.40 997 7.58%
3 Bank of America Merrill Lynch 216,160.55 723 7.32%
4 Barclays 185,098.93 672 6.27%
5 Goldman Sachs 158,991.47 518 5.38%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 32,522.19 61 6.54%
2 BNP Paribas 32,284.10 130 6.49%
3 UniCredit 26,992.47 123 5.43%
4 SG Corporate & Investment Banking 26,569.73 97 5.34%
5 Credit Agricole CIB 23,807.36 111 4.79%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 10,167.68 46 8.81%
2 JPMorgan 9,894.90 42 8.58%
3 Citi 8,202.25 45 7.11%
4 UBS 6,098.17 23 5.29%
5 Credit Suisse 5,236.02 28 4.54%