Weinstein’s Household management

Household’s spreads had widened to 800 basis points over Libor in the five-year bond and 1,000bp in the three-year in October, while its share price rose $6 to $26.

Boaz Weinstein, head of credit derivatives trading for the Americas at Deutsche Bank, decided to make the most of this by going long credit, which he did by buying $10 million-worth of five-year bonds at 75 cents on the dollar. He estimated that the recovery rate for Household’s debt would be 45 cents and so had 30 points of downside to protect.