Talking Point

  • Happy to succeed

    Investors are sanguine over succession issues

    Succession events can result in wild swings in CDS spreads and the cancellation of contracts. However, many structured credit investors feel there is less to fear now than previously.

    Asset managers are watchful of succession events as many view them as a market idiosyncrasy that should not be present. Many view them as a technicality where investors can make or .......

    Talking Point 25 April 2007

  • Broken Fixings?

    Tradable tranche fixings disappoint so far

    The development of credit fixings is widely touted as a watershed event in the development of the structured credit market. Banks and intermediaries have progressed from index to tranche fixings, but there is debate from the buy-side on whether they are providing the hoped for greater transparency, investor confidence and improved efficiency.

    The first electronic tradable tranche fixing took place .......

    Talking Point 18 April 2007

  • Spotlight on CRE CDO managers

    Tiering likely to become an issue

    Fears of sub-prime contagion or a broader market downturn and increasing investor sophistication are causing a greater focus on US CRE CDO managers. Ultimately, that focus could lead to tiering becoming as prevalent as it is in some other product sectors such as CLOs (see SCI issue 24).

    Dan Warcholak, director, portfolio management at CWCapital Asset Management in Washington DC, .......

    Talking Point 11 April 2007

  • Trading illiquids grows

    Increasing buy-side demand for structured illiquid credit

    Structured illiquid credit is becoming a burgeoning area for the investment community. Banks are ramping up their capabilities as demand grows from clients looking for financing solutions and alternative assets with enhanced yield.

    The strength of structured illiquid credit trading (SICT) platforms is the ability to create tailored solutions for a broad range of assets, making it appropriate for a .......

    Talking Point 4 April 2007

  • CPDOs for the masses?

    Banks already promoting CPDOs to some retail investors, but caution is required

    Strong demand for structured credit products from retail investors looking to diversify their portfolios has resulted in arranging banks heavily marketing complex products, such as CPDO and CPPI notes. However, this is currently only taking place in areas where there is a history of retail demand for structured credit.

    Though retail is yet to be present in the Asian distribution .......

    Talking Point 4 April 2007

  • Infrastructure LCDS proposed

    New loan instruments could be led by CDPCs

    Basel II is expected to boost opportunities for entities looking to offer CDS contracts on new asset classes and help manage regulatory capital requirements. Some firms, notably credit derivative product companies (CDPCs), could find a unique opportunity in infrastructure and project finance loans.

    "Basel II is obviously a very important development for CDPCs as it recognises CDS contracts from any .......

    Talking Point 21 March 2007

  • Diversifying CDPCs

    Credit derivative product companies are looking to widen their product offering

    The nascent credit derivative product company industry is gravitating towards other asset classes. Adding diversity is welcomed though venturing into the ABS and loan markets needs to be closely evaluated.

    Loic Fery, global head of credit markets and CDO at Calyon in London, believes that credit derivative product companies are a welcome addition to the market. "The emergence of CDPCs .......

    Talking Point 14 March 2007

  • Real estate reporting issues

    The CRE CDO market currently lacks transparency, but partici...

    The variety and complexity of commercial real estate (CRE) CDO structures is making deal comparison difficult for investors. Though there is a lack of standardisation of information, reporting standards are improving.

    "There are some efforts under way to provide some sort of industry standard, which I expect will come to light in the medium term and will provide more consistency .......

    Talking Point 7 March 2007

  • Operationally challenged

    Vanilla CDS backlogs may have diminished, but buy-side firms still have other processing concerns

    Buy-side firms continue to have concerns over credit derivatives processing, particularly with bespoke deals. In addition, poorly executed related operational services have caused some to re-assess who they deal with.

    Nevertheless, some aspects of the way the credit derivatives market is dealing with operational backlogs and trade and settlement issues are deemed adequate by investors. "We have had no problems .......

    Talking Point 28 February 2007

  • ABX tranches get nervous welcome

    Buy-side stays on the sidelines amid correlation uncertainty

    The meltdown in ABX spreads and resultant wide trading levels have spooked many in the market (see last week's SCI). Given this backdrop, it is no surprise that a nervous welcome met the launch of TABX – standardised tranches on ABX.HE indices – as many investors preferred to remain on the sidelines.

    "We have thankfully avoided that mess," says one .......

    Talking Point 21 February 2007

  • Bright futures?

    Buy-side firms upbeat about new European contracts

    Derivatives exchange Eurex's plans for trading futures on the iTraxx Europe five-year index from 27 March are garnering strong European support, at least from the buy-side. However, there is less momentum in the US, where the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) are jostling for first-mover advantage in the sector.

    Buy-side response to the initial .......

    Talking Point 14 February 2007

  • Opportunities knocked

    CLO alternatives have limited appeal for the timebeing

    There has been much talk of a new wave of interest in credit opportunities funds, particularly following the launch of Babson Capital's Fugu deal (see SCI issue 23). However, despite having a more flexible structure than conventional CLOs and able to take advantage of more volatile conditions, many feel development of the market could be limited.

    Credit opportunities funds combine .......

    Talking Point 7 February 2007

  • Tiering takes hold

    CLO managers accept pricing differential

    Intense competition and an ever-booming market is leading to a hierarchy in the pricing of CLO managers, with the veterans of the industry receiving better terms than their newer or less established counterparts.

    Market participants estimate that the top tier of CLO managers can receive between three and four basis points better pricing at the triple-A level – which becomes .......

    Talking Point 31 January 2007

  • Strength and depth?

    Q-WIXX questions from the buy-side

    Q-WIXX, Creditex's new electronic platform for trading credit derivatives portfolios, is expected to launch globally early this quarter. While the platform is designed to streamline the trading process and has some supporters on the buy-side, others have indicated certain drawbacks.

    Goldman Sachs, JP Morgan, Deutsche Bank, Credit Suisse and Cairn Capital undertook the first portfolio trade of 131 North American .......

    Talking Point 24 January 2007

  • Muted response to high yield launch

    Lukewarm buy-side reception for new benchmark indices

    The International Index Company's launch of the iBoxx Euro High Yield index family (see last week's issue) has been met with a somewhat muted response by structured credit investors. Despite the fact that with multiple-contributor pricing the iBoxx consolidated price will be the most accurate reflection of the market, many of the high-yield fund managers contacted were still to pass .......

    Talking Point 17 January 2007

  • A primer on valuing synthetic CDOs

    Richard Hrvatin, md in Fitch Ratings' credit products group...

    ?

    Richard Hrvatin, md in Fitch Ratings' credit products group in New York, describes the inputs necessary for estimating the market value of single-tier CDOs.

    In a funded synthetic collateralised debt obligation (CDO), a special-purpose vehicle (SPV) sells protection on an underlying reference pool by synthetically referencing a portfolio of single-name credit default swaps (CDS). The SPV offsets this risk by .......

    Talking Point 16 August 2006

  • Present and future

    A few thoughts from SCI to SCIs

    Welcome to the first issue of Structured Credit Investor. Normally this section will, as its name suggests, be the place to come for rumour and gossip – the remainder of SCI will deal in facts, however.

    'Rumour has it...' will usually be written by a member of the editorial team, but will occasionally be written by a guest contributor - .......

    Talking Point 9 August 2006
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