Derivs - Credit

Macro funds are selling five-year German government bonds swap spreads (Aswabobl) and buying protection on iTraxx Main to take advantage of the dislocation between the two spreads.

The International Swaps and Derivatives Association has published a protocol that enables parties to amend the terms of covered transactions to address future rate discontinuations.

ANZ is looking to expand its fx and rates structured flow product business in Asia, diversifying products and hiring onshore sales staff in South Korea, Taiwan and potentially Indonesia.

Recent press reports of Congressional and U.S. Commodity Futures Trading Commission investigations of possible price manipulations involving financial and energy assets have once again raised the question of what types of behavior constitute unlawful manipulation under the Commodity Exchange Act (CEA), which governs exchange and over-the-counter trading in a wide range of financial and commodities assets and values and can reach activities beyond U.S. borders.

Assenagon has been trading swaptions on the CDX investment grade North America index, expecting it to underperform Europe in the coming weeks even if the U.S. resolves the debt ceiling issue and avoids default.

The Hong Kong Securities and Futures Commission is leading the international charge to tackle cross-border extraterritoriality of global regulatory reforms stemming from the Pittsburgh G20 commitments, setting up a cross-border task force designed to bring industry and regulators together.

Political stasis in the U.S. weighed on global credit markets as the government shutdown entered its second week.

The International Swaps and Derivatives Association has published an FAQ to answer concerns expressed by market participants around a potential CDS credit event on U.S. sovereign debt at a time when discussions over the country’s debt ceiling continue.

Barclays is recommending buying 3m*5y low-strike receivers that are delta-hedged as current implied volatility levels on 5y tails are low enough to benefit from volatility due to the data-dependent guidance introduced by the Bank of England’s Monetary Policy Committee.

European credit indices could be more prone to underperformance relative to U.S. indices when the U.S. begins to taper its bond-buying program at the beginning of next year, according to strategists at Bank of America Merrill Lynch.

Investors concerned about potential spill-over from political concerns in the U.S. are revisiting low cost credit hedges in Europe, according to strategists at BNP Paribas.

Private banks and distributors are buying credit linked notes on single names where there is positive basis, such as Glencore, Heidelberg Cement and Alstom. They’re picking up yield when credit default swaps spreads are trading wider than the cash bond.