Derivs - Credit

Lawyers expect the U.S. government to issue an extended delay to the implementation of the foreign accounting tax compliance act, due to the burdensome requirements for financial institutions in complying.

Sterne Agee has acquired London-based credit brokerage Yorvik Partners as part of its international expansion outside of the U.S. Yorvik will be renamed Sterne Agee UK and will establish the firm’s first presence outside of the U.S.

Real money managers are buying out-of-the-money payers and payer spreads, sometimes funded by receivers, on the iTraxx Main and to a lesser extent on the Xover, as volatility edged higher and the payer smile steepened in both indices.

Structurers are seeing a renewed appetite for structured products on the U.S. dollar against both the onshore and offshore Chinese yuan, playing the view that USD/CNY and USD/CNH will steadily decline.

Strategists at JPMorgan are advising investors to go long Europe, short U.S. credit indices, expecting spreads on iTraxx Main to tighten against the North American CDX.IG next year. The strategists said credit risk in Europe is overblown and the CDX.IG is currently trading too tight versus Main.

Natixis is expanding its financial institution investor coverage in the Asia Pacific, hiring Daniel Yap from Credit Industriel et Commercial in Singapore.

Société Générale has created a new Asia-focused credit sales team, hiring four officials and promoting Pierre Trecourt, the former head of fixed income and institutions in the firm’s cross asset solutions business, to lead the unit.

Société Générale sees value in at-the-money-forward payer ladders on the U.S. dollar to position for a moderate sell-off in U.S. Treasuries.

The Korea Exchange has delayed the launch of its over-the-counter clearinghouse until March 3, 2014 at the behest of foreign investment firms.

Amundi Asset Management expects financial names in credit indices to compress against corporates in 2014. The fund is currently overweight on financials, attracted by higher spreads on names such as BNP Paribas, Crédit Agricole and Deutsche Bank.

Hedge funds, fast money and real money are buying longer-term receivers on Senior Financials with strikes at 100 basis points, 95 bps and some 80 bps for technical reasons, including the desire to position ahead of new credit default swap definitions due in March. The Asset Quality Review due at the end of the year is also weighing on spreads, with equity underperforming Senior Financials as banks seek to reduce the size of their balance sheets.

Asian markets should accelerate the development of credit derivatives, particularly in India and China, to promote the efficiency of financial systems and assist in the development of local Asian bond markets, according to the Asia Securities Industry and Financial Markets Association.