Derivs - Credit

Investors have been loading up on higher yielding long term corporate bonds, in spite of the asset class's average credit rating having declined in recent years.

Four banks have teamed up with the Depository Trust & Clearing Corporation, Markit, and Axoni, a distributed ledger technology firm, to undertake the market’s first test of a blockchain solution for managing single name credit default swap post-trade events.

The US Securities and Exchange Commission has a chance to examine its conscience over plans to curb derivatives use. It should do so after the industry condemned a sweeping approach that revealed little comprehension of the many sensible interactions that exist between derivatives and everyday capital markets.

Recent actions by the European Central Bank and US Federal Reserve, along with more buoyant commodity prices, have reined in a long running market dislocation, with the basis between credit default swaps and cash bonds having tightened during March.

The European Securities and Markets Authority (ESMA) has slammed the Depository Clearing Corporation’s Derivatives Repository on several counts for delays over data access, but served up a €64,000 fine for the breaches — a figure that amounts barely to an office whipround.

A key area of derivatives focus in the planned merger between data firms Markit and IHS will be opening up Markit's credit default swap analysis to IHS corporate clients, according to sources with knowledge of the matter.

Heightened talk around Brexit is adding to the pressure on UK credit spreads and, combined with European Central Bank promises of an investment grade corporate bond purchase programme, causing British names to underperform their eurozone peers. But market participants say this presents a buying opportunity as a reversal could follow.

Credit derivative indices rolled into new series on Tuesday, with traders reporting a big long bias in the outgoing US and European investment grade indices among buyside participants that caused the new series to trade tighter than the level implied by fair value.

Credit Suisse will shrink its global markets business even faster than previously planned, shutting several desks entirely, including European securitization trading, distressed credit, and long-term illiquid funding. The bank wants to shrink its trading unit to $60bn of risk-weighted assets before the end of the year, rather than $83bn-$85bn as previously announced.

Credit derivative indices rolled into new series on Tuesday, with traders reporting a big long bias in the outgoing Series 24 of iTraxx Europe among buyside participants that caused the new index to trade tighter than the level implied by fair value.

Credit index options prices have fallen so far following recent central bank moves that implied volatility measures are below trailing measures of realised volatility for the first time in four years.

GlobalCapital is pleased to announce the nominees for its 2016 US Derivatives Awards. Nominations are based upon market feedback and research conducted in recent months. Winners will be unveiled at a gala dinner in New York.