The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Credit derivatives: Investors’ hunt for value begins

Liquidity remains the primary challenge in the present environment, meaning that few credit managers have ventured beyond the relatively liquid credit derivative indices. Managers including BlueCrest, Cairn Capital, CQS and Pimco are all seeking to take advantage of the unique opportunities the dislocation in the credit market has created, say market participants.

"It’s tough to put on trades and cross significant bid offers other than in the most liquid of instruments," remarks one credit manager. "Most are focused on doing slow-burn trades with little risk and making a quick turn in the highly liquid stuff." Accordingly, most of the action is focused on trading the indices, index options and index tranches.

One of the most profitable and popular trades over the past 12 months has been to go long the equity tranche, while shorting the super-senior tranches. Being long equity was popular a year ago when equity correlation was at historically low levels. Also because correlation was low, super-senior tranches offered very low spreads.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree