Ok.... I know they're dead. In fact, some shops already made it official. Basel II/III capital treatment for securitization is the final nail on the coffin.
Nonetheless, we hear rumors, like urban legend, of new stuff being issued here and there.
Apologies if the topic has been discussed before. Couldn't find much using the search feature.
Would be v interested in hearing your thoughts on the future, if any, of this market.
Synthetic Tranches
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baghead
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Synthetic Tranches
rumour has it a big swiss house printed a managed synthetic CDO in November.
Nonetheless, the market is pretty much dead. The usual rating-arb investors have vanished.
Last time I checked, liquid tranches were mainly quoted in ITRX9 and CDX10 and less so in the on-the-run. That's a good indicator of what hedging demand there is for new issues, i.e. none (bespoke books have their initial correlation hedges on in ITRX9 and CDX10 and just don't need liquidity for current new issues)
Nonetheless, the market is pretty much dead. The usual rating-arb investors have vanished.
Last time I checked, liquid tranches were mainly quoted in ITRX9 and CDX10 and less so in the on-the-run. That's a good indicator of what hedging demand there is for new issues, i.e. none (bespoke books have their initial correlation hedges on in ITRX9 and CDX10 and just don't need liquidity for current new issues)
they don't ring a bell at the bottom - M. Bloomberg, BBC interview, Oct '08
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gentinex
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Synthetic Tranches
Think baghead is probably referring to articles such as this. But baghead's right, the usual demand around ratings arb isn't present anymore.
Re: Basel III, there is an exception in which dealers are allowed to use internal models to determine the capital charge for correlation positions so long as the models cover a wide variety of stress scenarios, see this Risk article and related stuff if you Google IRC / CRM. So there has been a bit of effort on the modeling / IT side around this recently. But so far this seems more for being able to reduce the capital charge on existing positions, rather than for new prints.
Related to this, most of the flow I've heard about this year has been related to unwinding / novating existing positions, in some cases institutions getting rid of their entire CDO portfolios.
People keep hoping that there will be enough demand for rolling IG9 positions that tranches in the next odd-numbered IG series will take off, but it didn't happen with IG13, and IG15 doesn't seem to be getting that much traction either...
Re: Basel III, there is an exception in which dealers are allowed to use internal models to determine the capital charge for correlation positions so long as the models cover a wide variety of stress scenarios, see this Risk article and related stuff if you Google IRC / CRM. So there has been a bit of effort on the modeling / IT side around this recently. But so far this seems more for being able to reduce the capital charge on existing positions, rather than for new prints.
Related to this, most of the flow I've heard about this year has been related to unwinding / novating existing positions, in some cases institutions getting rid of their entire CDO portfolios.
People keep hoping that there will be enough demand for rolling IG9 positions that tranches in the next odd-numbered IG series will take off, but it didn't happen with IG13, and IG15 doesn't seem to be getting that much traction either...
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polysena
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- Joined: Thu Jan 01, 2004 12:00 am
Synthetic Tranches
Helion, I am really not sure about the nail on the coffin.. but then who am I. I believe that with the coming into force of Solvency II and Basel III with its liquidity regime, the demand for "bonds" will increase ... price levels will have to raise, some players will shift from loans to bonds eprhaps, but even then.. in many countries the "eligible set of papers" is too small for the forthcoming demand.. one way out again is not only gov debt (sic).. but.. that type of business & in general securitisation back again.. and I feel that the following article in Risk (01 Dec 2010 ) Banks moving to build liquidity ahead of Basel III is right. Actually this si phrased in Are there enough liquid assets to satisfy regulations? Risk 1.11.2010
my 0.000001cent
my 0.000001cent
И ветер, и дождик, и мгла Над холодной пустыней воды.