Derivs - Credit

The fact a new electronic platform for trading credit default swap indices has launched amid a public relations crisis surrounding the product should help it succeed where previous attempts have failed, according to one user.

A survey by law firm Allen & Overy reveals strong support for a credit default swaps clearing house and disclosure of corporate derivative positions. Respondents were opposed, however, to bonus restrictions and short-selling bans.

The mass unwinding of basis trades capitalizing on the differential between bond spreads and the cost of protecting them from default is leading to a protection selling opportunity.

European credit indices have plateaued and only a significant catalyst is expected to trigger flows again.

Five-year credit default swaps on American International Group Inc. pulled in dramatically yesterday, along with a less pronounced tightening for two-year CDS, after the government renegotiated bailout package was announced.

The market is still digesting Circuit City Stores’ decision to file for Chapter 11. Credit default swaps on the name were so sparsely traded and the fact it does not appear in any CDS indices means it is unlikely to lead to a settlement auction.

European credit default swap trading has dried up to just a handful of trades a day, with many investors sitting tight after the equity markets took a beating.

Asian sovereigns are effectively becoming banking proxies as country credit default swap spreads are moved by the performance of their own banking systems.

Europe’s first credit event auction gripped the market this week, as final prices for settling credit derivatives on Icelandic banks were set.

Aggressive bidding by major European investment banks has led to a relatively high final price for settling credit derivatives trades referencing the senior debt of Icelandic bank Kaupthing.

The cost of purchasing protection on Marks & Spencer dipped after the U.K. retailer’s Baa2 rating was confirmed Wednesday.

Yesterday’s U.S. presidential election failed to trigger flows either way on Europe’s iTraxx Main index today.