Derivs - Credit

Credit default swap-bond basis have tightened, particularly for Italian corporates, after the European Central Bank unveiled its bond buying plan on Sept. 6, according to a Markit report.

Clearinghouses should cap to the amount members will have to contribute to replenish a default fund in the case of a failure, Deutsche Bank’s systemic risk management director Robert Lee said on the 2012 International Swaps and Derivatives Association North America Conference in New York last week.

The 8% of initial margin futures commission merchants will have to pay into clearinghouse default funds may be too high for some to afford. This will disincentivize market participants from offering clearing services, according to Robert Lee, director of systemic risk management at Deutsche Bank.

UBS is advising selling a 475 receiver option (25 basis points upfront) and buying a 625 payer option (29bps upfront) on iTraxx Xover for October expiry to take advantage of the underpriced index.

Swap trades will get smaller as counterparties tackle clearing requirements and look to cut costs, according to a panel at the International Swaps and Derivatives Association conference in New York yesterday.

After the euphoric reaction to the European Central Bank’s new Outright Monetary Transactions—or OMT--bond-buying program, the sovereign market returned its attentions to potential obstacles blocking the path of crisis resolution.

Bespoke indices and strategies in retail structured products are likely to continue to be a growing trend despite regulatory scrutiny of products with such underlyings and features, according to Peter Corner, global head of structuring, equity markets and commodities at Commerzbank.

Cathy Braganza, a former Citigroup credit analyst, has joined Insight Investment as senior credit analyst based in London, starting today.

Markit is removing Banco Bilbao Vizcaya Argentaria and Monte dei Paschi di Siena from iTraxx Main index Series 18, as recent rating downgrades weigh on the two banks.

The Royal Bank of Scotland is advising investors to take profits on long Fiat credit default swap and short Peugeot and Renault strategy, which it rolled out 15 days ago.

Itau BBA Securities has hired Alejandro Luciano, a credit research associate from Credit Suisse, as v.p. of emerging market credit trader based in New York.

Diana Place has joined Crédit Agricole Corporate and Investment Bank in London as director of emerging market fixed income sales.