Derivs - Credit

The iTraxx main and financial index wider today as investors continued to absorb painful news out of the banking sector.

China’s weakening fiscal position makes buying five-year credit swaps on the country’s sovereign debt a good macro hedge, according to Ben Simpfendorfer, chief China economist at the Royal Bank of Scotland in Hong Kong.

Credit default swap trading in Japan is still low in volume compared to the U.S. and Europe.

Equity derivative trading volumes plunged to an all-time low during the last quarter of 2008 as funds and prop desks pulled back.

The decision of whether changes Liz Claiborne made to its credit facility will trigger credit default swaps on the company’s bonds may be finalized by the dealer community Tuesday, according to one market watcher made aware of the plans.

Other market participants appear to be interested in getting a slice of the credit default swap clearing pie—beyond the existing four.

Details of Deutsche Bank’s fourth quarter losses are emerging, with market sources suggesting equity and credit derivative positions could be responsible for it at least USD2 billion of the EUR4.8 billion (USD 6.3 billion) hole the bank pre-announced last week.

Credit default swap spreads on Citigroup had blown out to 410 basis points by midday Wednesday as the rumor mill went into overdrive about the firm’s plans to reorganize and shed assets.

Last week’s gains in the credit markets were erased this week, with spreads on the iTraxx main gapping out 20 basis points from Monday’s close to sit around 174 basis points today.

Analysts at Deutsche Bank in Japan are advising investors to adopt a long/short credit spread strategy for 2009 to tap favorable carry spread trades in the Japanese credit default swap market.

Standard Chartered has tapped Mohammed Grimeh for the newly created role of head of trading and deputy head of global markets for the Americas.

Collateralized loan obligation expert Joe Moroney has resurfaced at Apollo Management.