Derivs - Credit

Buy and sell side credit traders expressed disappointment on Thursday, after the US Federal Reserve elected to keep interest rates on hold.

There was speculation this week among credit market participants that a recent high profile US legal settlement could open the door for a wider array of credit default swap clearing houses and exchanges. But firms at the heart of the battle refused to be drawn on whether the outcome could change the structure of the market.

The sharp fall in commodity prices over the past 12 months has placed the energy sector under increased scrutiny from credit investors. But it tends to be exploration and production firms, as well as mining companies, that have borne the brunt of negative sentiment. Utilities often benefit from lower prices in raw materials and their spread performance over the last year has been typical of the sector’s defensive status.

Mizuho International’s European head of high yield credit trading has left the job at the bank and will not be replaced.

For the OTC derivatives industry, joining forces is the only way to prepare for a rising tide of regulation. Only a combined industry initiative can drive the transformation in fluidity that will be needed when new regulations place collateral at the centre of every OTC derivatives trade. Unprecedented regulation is leading to unprecedented collaboration.

The International Swaps and Derivatives Association is likely to have to change its licensing practices as a result of a $1.9bn credit default swaps price fixing settlement by banks, according to a source familiar with the case.

An improved picture is emerging for credit, said traders and strategists this week, as concerns around global growth and energy prices abate. But the immediate beneficiary is more likely to be the US than Europe, they said, although borrowers on both sides of the Atlantic have a great issuing window.

An improved picture is emerging for credit, said traders and strategists this week, as concerns around global growth and energy prices abate. But the immediate beneficiary is more likely to be the US than Europe, they said, although borrowers on both sides of the Atlantic have a great issuing window.

Brazil’s downgrade to junk will come as little surprise to market observers, given the increasingly bearish sentiment seen in Brazilian sovereign bonds.

Recent global volatility stemming from China’s stock market battles has prompted debate among credit traders about the potential impact of a US rate rise this month, and fears for the consequences should it be pushed back to a later date.

Oil prices have rebounded from recent lows sending both investment grade and high yield oil and gas bonds to trade tighter than last week’s all-time highs.

Daiwa Capital Markets has hired a former head of sterling credit trading from Lloyds in a bid to increase the Japanese group’s presence in the currency.