Investors are turning to longer-dated leveraged super senior tranches, as rising demand for the highly-rated tranches has dampened yields. Credit officials in Europe have noted an upturn in the number of seven- and 10-year trades which reference steeper points on the yield curve and present more attractive pricing options. "All trades now hitting the market have longer maturities," noted one structurer.
"The juice that existed in five-year has gone," said Olivier Renault, credit strategist at Citigroup in London. AAA-rated leveraged super senior trades with seven- or 10-year maturities can extract 60-70 basis points more than five-year trades, he noted. A structuring official at a firm in Europe said investors have specifically asked for longer-dated deals to be priced. "Investors are certainly not getting the same returns on deals that were structured two or three months ago," he said, "So they are going from five to seven years."