Derivs - Credit

UBS has won a High Court fight with the hedge fund which formerly backed its structured products business, with the judge agreeing that deep cuts in UBS’s fixed income division did not breach the terms of the agreement.

This week we saw the first signs of contagion, albeit tentative, from the impasse in Greece. Spain, where the anti-austerity Podemos party is leading the opinion polls, saw its CDS spreads widen 11bp to 94bp (2003 ISDA definitions), while Italy was 13bp wider at 113bp.

Asset managers are increasingly looking to diversify their portfolios using credit default swaps, with many looking to basis trades for enhanced yield which buy and hold strategies no longer deliver.

Overall interest rate derivatives trading that was reported to swap data repositories last week increased by 59% from the previous week, according to data from the International Swaps and Derivatives Association.

Hedge funds took profits on short positions in credit default swap trades on Portugal Telecom ahead of the sale of its operating unit to Altice, the Luxembourg based cable investment company, on January 22.

Greece was relegated to emerging market status by several index providers last year, and its recent turmoil seems to justify the reclassification. But the ongoing problems in there shouldn’t overshadow issues in sovereigns more familiar to EM investors.

Hedge funds are looking at buying single name credit default swaps on Greek names after a muted market reaction to the election of the Syriza party to government.

Real money investors are buying payers with short-dated expiries on iTraxx Main after political uncertainty in Greece.

Overall interest rate derivatives trading that was reported to swap data repositories last week decreased by 9% from the previous week, according to data from the International Swaps and Derivatives Association.

Hedge funds are eyeing the spread differential between iTraxx Senior Financials and iTraxx Main, which has gone from 1bp in December to wides of almost 10bp this week, following the election of the left-wing Syriza party in Greece. The interest comes on the back of an expectation that the SenFin index will outperform in the longer term.

The result of the Greek elections on Sunday was clear — an emphatic victory for the anti-austerity Syriza party. The Greek public have signalled that they want to move in a different direction from that of austerity, which they blame for causing high levels of economic pain.

The Japan Exchange and The Singapore Exchange have launched a co-location direct service to offer straight through international network connectivity between data centres in either country following a letter of intent signed between the two exchanges last December.