Derivs - Credit

The E.U.’s long-held policy on fiscal austerity appeared to buckle slightly this week after it relaxed deficit targets for six countries.

Nancy Davis, the former head of trading for OTC, derivatives and credit at Goldman Sachs prop in New York, is to launch a discretionary global macro firm.

Since its inception, the non-FX/equity OTC derivative market was largely self-regulated. As the market grew from the late 1990s to mid-2005, this model worked well. New dealers were entering the OTC derivative market and competition amongst this group was fierce. However, as the participating dealer base peaked around 2005, so too did conditions of free money and leverage. These conditions helped fuel the financial crisis that would soon follow and completely reshape the OTC derivative and financial markets.

Investors should buy iTraxx Xover S19 receivers and sell DAX calls to take advantage of the recent underperformance in the credit index against the equity index.

Georges Fernandes, an emerging markets credit trader at Mizuho Securities in New York, has left the firm.

NASDAQ OMX and LCH.Clearnet have received regulatory approval to launch the NLX market, which will offer trading of short-term interest rate and long-term interest rate euro- and sterling-denominated listed derivatives.

The Royal Bank of Scotland is recommending investors enter a Eurodollar future butterfly and condor structure to take advantage of recent market dislocations.

Newedge’s U.K. and U.S. businesses have joined LCH.Clearnet SwapClear to clear listed interest rate swaps.

The proposed amendments to ISDA definitions covering credit default swaps, which include a bail-in clause among other changes, is a positive step for the market, Benjamin Jacquard, global head of credit trading at BNP Paribas in London, told DI in an interview.

Hedge funds are trading synthetic mezzanine classes of Swiss and German small- and medium-sized enterprise collateralized loan obligations. The activity is a yield play as the paper offers a better return currently available in other structured credit products.

Credit spreads across the globe have rallied on the back of Abenomics, the unconventional, expansionary monetary policy implemented by the Bank of Japan in April.

Algorithms or expert judgment should be used when there is insufficient relevant transactional data to compile a benchmark, according to George Handjinicolaou, deputy ceo and head of Europe, Middle East and Africa at the International Swaps and Derivatives Association.