Derivs - Credit

The Securities and Exchange Commission and Commodity Futures Trading Commission have reportedly decided which parts of the over-the-counter derivatives market each will oversee, with the SEC getting jurisdiction over credit default swaps and equity derivatives.

Credit default swaps referencing Lear Corp. were settled at 38.5%, Markit and Creditex determined in an auction today. The result means sellers of protection on the company’s bonds will pay out 61.5 cents on every dollar of protection sold. Loan-only CDS were valued at 66%, meaning buyers of protection will recover 34.

Five-year credit default swaps on Middle East financial names gapped out dramatically today after banks in the region announced sharp declines in second quarter earnings Saturday.

Eurex is close to announcing the single name credit default swap contracts eligible for central counterparty clearing as the July 31 deadline set by the European Commission approaches.

Defaults in high-yield corporate bonds could go as high as 18% by the end of the year, a new high, according to analysts at Fitch Ratings. The year-to-date default rate as of June has hit 9.5%, they said.

BayernLB is looking to reduce its proprietary investments in credit derivatives over the next 12 to 18 months.

Standard Chartered is preparing to beef up its global credit trading and sales teams over the next six months. Remy Klammers, global head of fx, rates, credit and structured products trading in Singapore, is overseeing the expansion.

The U.S. Department of Justice confirmed last night its investigation into potentially anticompetitive behavior among generators of credit derivatives pricing and revealed that clearing providers would also come under scrutiny.

The five main interdealer brokers, ICAP, GFI Group, BGC Partners, Tradition and Tullett Prebon, have formed a group called the Wholesale Market Brokers’ Association Americas, which met for the first time today to discuss its mission statement and a forthcoming Web site.

The U.S. Department of Justice investigation into credit default swap pricing is being seen by some as a logical move, but also many CDS traders told Derivatives Week they believe the investigation will fizzle out.

Five-year credit default swaps on British Airways pulled in by more than 40 basis points this morning on reports the airline’s pilots have agreed to take a 2.6% pay cut in a bid to help the company weather the aviation downturn.

Emerging market credit default swaps recently went from monthly maturities to quarterly.