Derivs - Credit

The European Commission’s plans to amend the Capital Requirements Directive, proposed last year, will be on the agenda at next Tuesday’s meeting of banking representatives at the European Central Bank in Frankfurt.

A report on the future of European financial supervision, ordered by the European Commission, is expected to support tighter regulation of the credit derivatives markets, but unlikely to offer explicit recommendations as to how that should be done.

The cost of buying protection on Japanese corporate bonds has hit a very “irrational level”, according to Junichi Shimizu, credit analyst at Deutsche Bank in Tokyo.

DBRS is set to tweak part its collateralized debt obligation and structured credit methodology for structured finance and leveraged loan products.

Broadpoint DESCAP, the arm of Broadpoint Capital focusing on asset-backed and mortgage-backed securities and rates products, has launched an advisory group.

Spreads on the iTraxx main in Europe cracked through the psychological 150 basis point mark this week, closing on a bid/offer spread of 156-157 bps late Friday as the market resigned itself to more uncertainly around the specifics of U.S. economic stimulus plans.

Market participants are preparing for fixed coupons on senior tranches of the iTraxx and CDX indices after a move two weeks ago to convert to points upfront from running spreads in the 3-6%, or mezzanine, layer of the iTraxx main in Europe.

In response to backlash received overnight, the U.S. House Agricultural Committee voted to keep a provision that would mandate the central clearing of credit default swaps over designated clearinghouses, eliminating terms that might have offered a potentially costly alternative.

Dmitry Green, head of risk management at BlueMountain Capital Management, told attendees at the Global Association of Risk Professionals’ 10th annual conference in New York yesterday that the firm uses 40 proprietary stress tests for determining its capital at risk from market shocks.

The U.S. House of Representatives Committee on Agriculture will hold a meeting tomorrow to consider the latest draft of the Derivatives Markets Transparency and Accountability Act of 2009, following two consecutive days of hearings on Capitol Hill.

Some end users think the industry committee being established to rule on whether credit default swaps should be triggered following certain credit and succession events and other issues pertaining to the new style of CDS contracts is too heavily weighted toward dealers.

Credit default swaps spreads on UBS widened only slightly today despite the troubled Swiss bank reporting worse than expected results, as single name activity in general continued to meander.