Fitch: credit derivatives growth continues

Trading in credit derivatives increased 113% in 2006 to $49.9 trillion worldwide, according to a report released by Fitch Ratings, which warned that the market was still vulnerable to a sudden downturn.

Index-based products traded more heavily than single-name credit default swaps (CDS) for the first time, at $22.2 trillion against $20 trillion notional, Fitch said. And the share of products referencing low-quality debt also continued to rise: 38% referenced speculative-grade or non-rated debt, compared with 34% in 2005 and 18% in 2003. Fitch said this represented a continuing search for yield in a low-spread environment.

Looking forward, the agency said market participants expected continued but slower growth of between 11% and 50% this year, led by growth in collateralised debt obligations, loan CDSs and traded indexes. The market was most likely to face problems related to a turn in the credit cycle or the lack of adequate documentation for LCDS transactions.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here