Derivs - Credit

The European Securities and Markets Authority and the European Banking Authority published their final report setting out principles governing transparency and robustness of benchmarks today.

Investors have been picking up hybrid range structures to maintain better yield levels in the low volatility environment.

Investors should switch from cash into credit default swaps on senior financials due to the steeper curve in the latter. The switch offers traders chance to pick up yield and roll on a highly directional basis.

The European Securities and Markets Authority has declared that a central counterparty should not exclude client positions from the calculation of the size of the default fund.

Hedge funds are buying structures to position for interest rates increases and appreciation in a particular currency. Combining the two options significantly reduces their premium.

The increase in hedging costs post-Dodd Frank will lead to a drag on fixed income portfolio returns, with costs ranging from 20-62 basis points for centrally cleared instruments, according to a report from Sapient Global Markets.

Investors should sell J.C. Penney 5y credit default swaps at USD9 points, with a target of USD6 points, to position for a cautious recovery by the company this year.

Ashwin Kulkarni, ex-head of interest rate volatility trading at Credit Suisse in New York, has joined Nomura as an executive director and head of U.S. interest rate volatility trading, also in New York.

Strategists at the Royal Bank of Scotland are recommending investors receive 9x12 forward rate agreements on the South African rand, to play the view that the South African Reserve Bank will not intervene in its currency.

Tradition has launched sterling interest rate swaps on its Trad-X IRS hybrid electronic trading platform.

ICAP is now trading sterling on i-Swap, its electronic interest rate derivatives platform.

The applicability of the Basel III credit valuation adjustment add-on against corporate hedging transactions could put Asian corporate clients at a disadvantage and result in less hedging, Nitin Gulabani, global head of fx, rates and credit at Standard Chartered, told DI in an exclusive interview.