Posts tagged 'Markit CDX IG index'

CDX tranches, now trading without delta near you!

Back up a moment to remember what first brought JP Morgan’s Chief Investment Office to our attention.

It was a bunch of hedge funds complaining to journalists that big trades done by the CIO were causing the Markit CDX.NA.IG.9 credit index to become a lot cheaper than its component parts. Read more

The remarkable resurgence in synthetic credit tranches

On a scale of meh (0) to tin hats at the ready! (10), FT Alphaville is thinking that the bank-led synthetic securitisation market is currently at about a 3. While worth keeping an eye on, these bespoke deals are still relatively small beans compared to what the market was just before the crisis struck.

Meanwhile, the more standardised side of the corporate credit market, involving trades on credit indices, has seen an impressive growth in risk-taking and activity since the beginning of the year. Read more

Shamu in the swimming pool

Hedge funds are not happy.

Don’t everyone run to their defence at once now. Read more

The curve trade

A “tempest in a teapot. That’s how JP Morgan CEO Jamie Dimon described the fuss caused by the bank’s Chief Investment Office apparently entering into large credit trades. It may well be teapot-sized, for him. The point for some hedge funds is that even if it was a swimming pool, you’d feel a bit cramped if Shamu joined you for your morning laps.

Which is to say that, for those actually trading credit indices, the thing that is such a big deal is whether the trading behaviour of JP Morgan’s CIO distorted the market. Less of a big deal is whether JP Morgan is going to land itself in trouble if the trades aren’t actually hedges but proprietary bets, hence go against the Volcker Rule. Read more

Thar she blows!

Whale-watching in the credit default swap market has become something of a pastime for pundits and market participants alike.

For the uninitiated, the short version of this story is that many believe that a trader (aka “The London Whale”, or “Voldemort”) in JP Morgan’s Chief Investment Office (CIO) has been amassing such large positions in various credit indices that it is potentially: Read more

CDS update: Credit underperforms

This CDS report was written by Markit’s Gavan Nolan
Credit underperformed equity today in a mixed trading session. The Markit iTraxx Europe saw its rally curtailed as the index widened by 8bp to 189bp. The 4% decline exceeded the 1-2% falls in the major stock markets. Tightening credits more or less equalled the number of widening names in the main index. The Markit Crossover index widened beyond 1100bp again after a brief hiatus.

The insurance sector, among the most volatile in recent weeks, was in focus. Friends Provident posted a significant net loss for 2008 but reassured investors by cutting its dividend. Its capital position was relatively strong in comparison to some of its peers. Larger rival Aviva, which saw its cost of protection rise sharply earlier this month after it maintained its dividend, widened after the results. Read more

CDS update: Markets buoyant, despite bad news

This CDS report was written by Markit’s Gavan Nolan
It is not often that a company reporting a £24.1 billion net loss for a year – a UK record – would be regarded as a cause for celebration. But these are extraordinary times, and Royal Bank of Scotland is no ordinary company. The figures were no great surprise to the market, and in some respects were better than expected. Most of the loss – £16.2 billion – was due to a goodwill writedown on its near-fatal acquisition of ABN Amro. But the real focus was on the bank’s participation in the government’s asset protection scheme. RBS is putting £325 billion of its assets in to the scheme – more than expected. The terms are also more favourable to the bank than many supposed. RBS will be liable for the first £19.5 billion of losses. If further losses are incurred, 90% will be absorbed by the government, with RBS exposed to the 10% residual. The cost for the insurance will be £6.5 billion in non-voting B-shares. The government will increase its stake even more as RBS is issuing more B-shares to fund the initial tranche of losses.

Markit CDS chart Read more