简体
|
繁体
loading...
海外博客
按全文
按作者
首页
新闻
读图
财经
教育
家居
健康
美食
时尚
旅游
影视
博客
群吧
论坛
电台
热点
原创
时政
旅游
美食
家居
健康
财经
教育
情感
星座
时尚
娱乐
历史
文化
社区
帮助
advertisement
您的位置:
文学城
»
博客
»
财经观察 1617 --- Cheap bonds make for easy money
财经观察 1617 --- Cheap bonds make for easy money
2008-12-11 18:33:54
不忘中囯
写日记的另一层妙用,就是一天辛苦下来,夜深人静,借境调心,景与心会。有了这种时时静悟的简静心态, 才有了对生活的敬重。
首页
文章页
文章列表
博文目录
给我悄悄话
打印
被阅读次数
Cheap bonds make for easy money
By
Nick Ferguson
|
12 December 2008
The price difference between cash bonds and credit default swaps provides a good opportunity for investors with cash to spare.
When markets are put under extreme stress they create all kinds of oddities. Under normal circumstances, opportunistic traders at hedge funds and proprietary trading desks take advantage of such peculiarities and, in doing so, restore equilibrium. Today, markets are not so efficient.
One obvious manifestation of this is the discrepancy between corporate bond prices and the price of credit risk. Since the collapse of Lehman Brothers in mid-September, bond prices have fallen much more dramatically than the risk of default has risen, creating a yawning gap between the price of credit default swaps (CDS) and their underlying bonds.
This is a direct result of the market conditions – bond prices are being pushed down to abnormally low levels by investors who are under pressure to de-leverage and reduce the size of their balance sheets. And in many cases they are the same investors who would normally take advantage of the distortion this over-selling has created.
This price discrepancy is known as negative basis. It is not a new phenomenon; institutions have been profiting from it for a long time with a very simple technique. They buy the cheap bonds and then insure against the risk of default by buying the CDS. This removes the credit risk and lets the investor pick up the spread for free. And, in many cases, corporate bonds are now trading hundreds of basis points cheaper than their CDS.
But with so many institutions unable to take advantage, structurers are now coming up with ways for private banking clients to get in on the action. "The idea of buying a bond and hedging with CDS is something that institutions do but which is tough for private banking clients to do because most of them don't have access to the CDS market," says Olivier Destandau at Deutsche Bank. "We've repackaged negative basis from the corporate bond market into a product that can be distributed to investors who typically don't have access to this opportunity."
The Deutsche product is simply a note linked to a portfolio of these negative basis trades. The bank's structurers buy the names with the widest spreads and package them into a special-purpose vehicle, which then sells the negative basis notes to investors.
Typically, the notes are structured over three or five years and are intended to be held to maturity, paying a semi-annual coupon and returning the investor's entire principal at the end of the note's life.
The coupon investors earn depends on the timing and size of the trade. During the past three months portfolios have typically generated 100bp or so over Libor, but recently Destandau says that he has been able to create portfolios with a spread of more than 200bp.
Although it is intended to be held to maturity, investors can sell the note whenever they want. "If market conditions normalise what you're likely to see is more appetite for the cash bonds, so the basis against CDS will actually tighten and this arbitrage opportunity will disappear," says Destandau. In that case, the value of the note will go up. "And because we're providing daily liquidity, investors can then trade the note and get out of it when they find a better opportunity.”
Depending on the client, such notes can be structured with fixed or floating rates, and can be quantoed into local currencies or bought straight in euros or dollars. The notes can be called by the issuer after one year, and quarterly after that.
© Haymarket Media Limited. All rights reserved.
登录
后才可评论.
今日热点
人间清醒与人间糊涂
多伦多橄榄树
国庆,《大而美法案》后的税务变化有哪些?(图)
菲儿天地
被自己家的边牧咬了
风河零九
当被陌生人邀请加微信好友......
尘凡无忧
我挣的第一桶金
Y自然流露Y
班芙的美(多图)
GoBucks!
“南京红姐”之事件,全民狂欢毁三观
雅酷原创
衣食住行之首
桃子苹果
他说要去芝加哥
老小明
国军为何惨败?听蒋委员长怎么说
赵大夫话吧
再看电影《角斗士II》
谦谦美君子
R 最忆是大连(下):老虎滩/棒棰岛/旅顺…
雲河
说很清爽的话儿
铃兰听风
老安游记《西南欧埃及三周游》第七篇:埃及-尼罗河游轮
安主
advertisement
advertisement
一周热点
2025年回国感想
九月红豆
吃得就是任性!国庆节挑战105磅巨无霸汉堡
爪四哥
从移民到总统, 祝你生日快乐
BeijingGirl1
在美国拔罐
帕格尼尼
人间清醒与人间糊涂
多伦多橄榄树
2025上半年三地股市见闻: 投资与做人
康赛欧
伊朗女生、韩国女生、加拿大女生:做爱彼迎民宿教育了我
SUDreamers
进攻伊朗犯了战略错误
朱头山
以色列——被逐出欧洲家园犹太人的无奈归宿(一)
橡溪
BeijingGirl1真的被封号了吗?
硅谷居士
航空“奥斯卡”,最佳新排名,鱼子酱VS大米粥(图)
菲儿天地
一个去菜场买菜都要照镜子的人
翩翩叶子
终究被女儿嫌弃了
广陵晓阳
美国梦碎:精英女儿出圈了。。。
岸沚汀兰
advertisement
财经观察 1617 --- Cheap...
切换到网页版
不忘中囯
名博
给我悄悄话
博文列表
财经观察 1617 --- Cheap bonds make for easy money
不忘中囯
(2008-12-11 18:33:54)
评论
(1)
Cheap bonds make for easy money
By
Nick Ferguson
|
12 December 2008
The price difference between cash bonds and credit default swaps provides a good opportunity for investors with cash to spare.
When markets are put under extreme stress they create all kinds of oddities. Under normal circumstances, opportunistic traders at hedge funds and proprietary trading desks take advantage of such peculiarities and, in doing so, restore equilibrium. Today, markets are not so efficient.
One obvious manifestation of this is the discrepancy between corporate bond prices and the price of credit risk. Since the collapse of Lehman Brothers in mid-September, bond prices have fallen much more dramatically than the risk of default has risen, creating a yawning gap between the price of credit default swaps (CDS) and their underlying bonds.
This is a direct result of the market conditions – bond prices are being pushed down to abnormally low levels by investors who are under pressure to de-leverage and reduce the size of their balance sheets. And in many cases they are the same investors who would normally take advantage of the distortion this over-selling has created.
This price discrepancy is known as negative basis. It is not a new phenomenon; institutions have been profiting from it for a long time with a very simple technique. They buy the cheap bonds and then insure against the risk of default by buying the CDS. This removes the credit risk and lets the investor pick up the spread for free. And, in many cases, corporate bonds are now trading hundreds of basis points cheaper than their CDS.
But with so many institutions unable to take advantage, structurers are now coming up with ways for private banking clients to get in on the action. "The idea of buying a bond and hedging with CDS is something that institutions do but which is tough for private banking clients to do because most of them don't have access to the CDS market," says Olivier Destandau at Deutsche Bank. "We've repackaged negative basis from the corporate bond market into a product that can be distributed to investors who typically don't have access to this opportunity."
The Deutsche product is simply a note linked to a portfolio of these negative basis trades. The bank's structurers buy the names with the widest spreads and package them into a special-purpose vehicle, which then sells the negative basis notes to investors.
Typically, the notes are structured over three or five years and are intended to be held to maturity, paying a semi-annual coupon and returning the investor's entire principal at the end of the note's life.
The coupon investors earn depends on the timing and size of the trade. During the past three months portfolios have typically generated 100bp or so over Libor, but recently Destandau says that he has been able to create portfolios with a spread of more than 200bp.
Although it is intended to be held to maturity, investors can sell the note whenever they want. "If market conditions normalise what you're likely to see is more appetite for the cash bonds, so the basis against CDS will actually tighten and this arbitrage opportunity will disappear," says Destandau. In that case, the value of the note will go up. "And because we're providing daily liquidity, investors can then trade the note and get out of it when they find a better opportunity.”
Depending on the client, such notes can be structured with fixed or floating rates, and can be quantoed into local currencies or bought straight in euros or dollars. The notes can be called by the issuer after one year, and quarterly after that.
© Haymarket Media Limited. All rights reserved.