The uptake of credit derivatives by corporates is lukewarm at best but Natasha de Teran finds bankers bullish about the future of this market.

Natasha de Teran explores Europe’s rocketing corporate credit spreads and the resulting surge for asset-backed securities.

Agence France Trésor has been a pioneer of European inflation-linked bonds. Natasha de Teran interviews chief executive Bertrand de Mazičres about the development of these debt instruments.

Hedge funds may be cagey about their investment strategies but their use of credit derivatives is doing the market no end of good. Natasha de Teran explains why a lack of transparency is the least of bankers’ concerns.

Bankers who think that credit derivatives give them risk protection may find themselves on the wrong end of market mispricing. Natasha de Teran reports.
For some while now the world’s leading banks have been seen as the villains of the credit derivatives (CDs) markets. They parcel up their poorly performing assets, it is claimed, and sell them on to unsuspecting investors. Then, when a credit blows up – Enron, Worldcom, Parmalat – it is the insurance companies and other investors that take the hit and not the banks, complain critics. It is great for the world financial system as bank collapses are avoided. But dreadful for shareholders and buyers of with-profits policies from insurance firms whose returns are ruined.

Credit contracts are about to be listed for the first time as exchanges compete for potentially lucrative licensing deals, reports Natasha de Teran.

Europe has become the home of OTC derivatives innovation but, as Natasha de Teran reports, European houses are gearing up for a predicted upswing in demand on the other side of the Atlantic, and will give US firms a fight on their own turf.

Emerging market credit derivatives are experiencing a resurgence after
turbulent times. Current activity is led by sovereign names and
investors looking for yield pick-up, but corporate names and liability
management are in the wings. Natasha de Teran reports.

The trend for cross-asset trading has spawned a new product, equity default swaps. Supporters are championing their advantages but, says Natasha de Teran, it is likely that EDSs will have to jump through a few more hoops before take-up is widespread.
For some banks the fall in equity prices and the demise of the dot.com-fuelled equity investing culture happily coincided with an increased focus on credit risk management and the fast development of the credit markets. Those that managed to gain a lead in the rapidly growing credit sphere have reaped the rewards.