Derivs - Credit

It would be madness for the European Banking Authority not to consider the impact of the European Central Bank’s long term refinancing operation (LTRO) in next year’s stress tests for the bloc’s lenders. But should banks really be penalised for making use of a funding tool that was designed to help them?

Antonio Cailao, a director and head of investment grade credit trading at Barclays in Singapore, has left the firm.

To fade the gap in implied volatility between long-dated eurodollar and short sterling contracts, Newedge is suggesting selling long-dated at-the-money straddles on short sterling versus buying long-dated ATM straddles on eurodollars.

Hedge funds and real money players are positioning for normalization between swap spreads and credit because the iTraxx Main is trading too tight relative to European swap spreads.

The recommendations of the U.K.’s Independent Commission on Banking chaired by Sir John Vickers published Sept. 2011 will have a profound effect on banking in the U.K.

Credit default swap spread volatility on the U.S. indices could rise in line with escalating political tensions in the U.S., according to strategists.

The final quarter of 2013 opened amid fresh bouts of political instability on both sides of the Atlantic.

Markit has licensed its CDX North American IG, CDX North American HY and iTraxx Europe indices to four swap execution facilities that have been approved by the Commodity Futures Trading Commission.

The tight range on 30y sterling rates has strategists at Credit Suisse seeing value in buying 3m30y GBP straddles.

Five-year credit default swaps on Portugal Telecom snapped tighter today after news of a merger with Oi, the Brazilian telecommunications company, of which Portugal Telecom is the largest shareholder.

Investors who buy protection on the iTraxx Main as a hedge for their cash portfolios should sell an iTraxx Main S20 – 20 Nov. 125 basis point payer for 10 cents to reduce the negative carry of the position and to leverage on the steep smile and high forward, according to strategists at BNP Paribas.

The U.S. Commodity Futures Trading Commission’s one-month delay for registered swap execution facilities from any enforcement under the SEF rules with regard to market participants who trade on such SEFs isn’t long enough for the industry.