Derivs - Credit

Trade groups are criticizing Basel Committee On Banking Supervision risk management proposals that would require firms value incremental default risk on its own for the first time.

ABN AMRO in Brazil two weeks ago closed a second tap to the first-ever synthetic Latin American collateralized loan obligation.

Some bankers in Asia are speculating that excess collateralized debt obligation structuring staffers might begin to be nudged within firms into hybrids teams.

The downgrade of 16 constant proportion debt obligations by Moody's Investors Service last week has strategists increasingly worried about the effects unwinding leveraged structures could have on the rest of the market.

Hedge funds in Asia are attempting to pick up convertible bond arbitrage traders from the sellside and banks themselves are also hot on hiring and retaining them, according to recruitment officials.

Investors are positioning for a decrease in recovery rates across credit by playing the relative value of corporate collateralized debt obligation tranches with a fixed recovery rate against tranches with a floating recovery rate.

Credit-default swaps on monolines that choose to split their businesses in half will face a succession event, causing a significant re-pricing of the contracts.

Walter Womersley, previously head of credit structuring at Rabobank in Hong Kong, has joined Standard Bank as head of structured credit.

The credit crisis caused by overheating in the US subprime mortgage market claimed its biggest victim this week, as the German government had to marshal the country’s banks into a consortium to rescue IKB Deutsche Industriebank.

The financial services industry, long regarded as a safe haven from private equity raiders, was startled this week by the spectre of LBO risk as Sallie Mae fell to a $25bn leveraged buy-out, the largest ever in the US financial sector.

The barrage of 10 year dollar and euro bond issues from triple-A public sector borrowers continued this week — but they were outgunned by the banks, which bombarded the market with more deals than market participants could remember in any previous week.