Relative-Value Equity Tranche Trading Spikes

Recent underperformance of longer-dated index equity tranches relative to five-year equity tranches has traders seeing a rise in relative-value trading opportunities.

  • 03 Feb 2006
Email a colleague
Request a PDF

Recent underperformance of longer-dated index equity tranches relative to five-year equity tranches has traders seeing a rise in relative-value trading opportunities. One popular trade, called a five-to-10-year equity flattener, has investors going long CDX5 10-year equity risk--selling credit-default swaps on the 10 year--and short CDX5 five-year risk, said Ashish Shah, co-head of credit strategy at Lehman Brothers in New York.

Trades across equity tranches of different maturities have grown out of increased issuance of seven- and 10-year CDS index super-senior tranches, Shah said. Overcrowding in five-year super-senior tranches last year caused value to be squeezed both down the capital structure (DW, 10/7) to equity tranches and across maturities to longer-dated super-senior deals (DW, 9/23). Value in seven- and 10-year super senior tranches is just now starting to be redistributed, causing longer-dated senior tranches to tighten and longer-dated equity tranches to widen.

  • 03 Feb 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%