Credit Suisse First Boston is working on a synthetic index of leveraged loans constructed as a credit derivative, believed to be the first of its type, according to Derivatives Week, an LMW sister publication. Leveraged loans are a growing area of fixed income, but they are rarely used as a reference entity for credit derivatives, according to an official at the firm. As liquidity in the credit derivatives arena develops, it is a natural extension to apply this technology to the secured debt market, he added. David Carlson, global head of developed markets credit derivatives in New York, said the index is designed to boost liquidity and transparency in credit derivatives on leveraged loans.
The index, dubbed Select Aggregate Market Index "SAMI" (Secured), will reference a basket of 50-60 of the most liquid U.S. loans, according to an investor. CSFB is pitching the index to fixed income accounts, money managers, banks, hedge funds and collateralized loan obligation managers. Hedge funds executing relative-value trades against the index are likely to be the first clients, noted an official. Loan fund managers hedging their exposures will also use the product, added one buy-side official.