Derivs - Credit

Veteran credit strategist Suki Mann is back in the inboxes of investors and traders, after setting up a website called Credit Market Daily that he hopes will bring corporate bonds to a wider audience.

How collateral’s rise will profoundly impact markets

Traders this week reversed the recently growing dispersion among some of Europe’s widest iTraxx Crossover credits, with Abengoa rallying sharply as three banks backed the company’s rights issue. But the reprieve was brief and against the tide, say some participants.

Was it all a dream? At the start of the week the markets were in the throes of a full-blown panic, with talk of “Black Monday” and plentiful comparisons with the Lehman collapse. Yet barely three days later, the iTraxx Europe was back trading at 70.5bp, exactly the same level it was quoted at a week ago.

Global equity and debt markets rallied on Tuesday, while volatility subsided, after the People’s Bank of China cut its one year lending rate. But for hard hit emerging markets, more pain could be on the way.

Barclays has promoted Alex Aram to head of credit trading for Asia Pacific and has added two new hires to the region’s credit team.

Changes to rules governing the composition of US credit index CDX HY will improve the product’s relevance to debt markets and help address its recent disconnect from cash bonds, said market makers.

We remarked last week that emerging markets could face a difficult time ahead. Well, we didn’t have to wait long before the early manoeuvers in a possible currency war had an impact on sovereign CDS spreads.

Currency options markets have seen an implied volatility spike, which could bleed into other asset classes. As the emerging markets tail wags the global volatility dog, investors across all asset classes are suddenly in a more cautious mood.

South Africa is experiencing a difficult week in credit markets, with credit default swaps that reference its debt hitting their widest point for two years.

Numen Capital, a London based credit manager, has hired an experienced trader to its team as a portfolio manager and research analyst.

Markit is set to unveil changes in CDX HY, the US high yield credit derivatives index, aimed at making it more useful as a hedging tool for cash bond investors and reviving ailing trading volumes in high yield credit.