The issuance of arbitrage synthetic and cash collateralised debt obligations (CDOs) in Japan is set to remain at a standstill due to tight credit spreads, according to a report published by Moody’s Investors Service.There were nine synthetic CDOs issued in Japan in the first nine months of the year, all of which were balance sheet transactions. “Japan’s credit risk market is experiencing a tightening in credit spreads, due to the protracted low interest rate environment and excess liquidity," says the report. "Consequently, little issuance of arbitrage CDO transactions – referencing Japanese names – has occurred," it adds.
Moody’s has rated a total of 20 cash and synthetic CDO transactions in the first nine months of the year. These deals were worth ¥4.08 trillion ($34.8 billion), compared with 21 deals worth ¥2.4 trillion ($20 billion) over the same period last year. Moody’s noted that the difference in volume was due mostly to major banks offering balance sheet CDOs in the second quarter.
In the third quarter of the year, Moody’s rated eight CDOs worth ¥880.9 billion ($7.74 billion), including four primary collateralised loan obligations (CLOs). According to the rating agency, primary CLOs, along with re-securitisation, are the asset classes that will continue to grow most significantly in Japan.
More on Structured Products
UBS bolsters New York equities desk, among other moves in June
Product will pay 5.95% annually if FTSE 100 or Euro Stoxx 50 are above 65% barrier on coupon date
Lack of liquid options on European mid-cap benchmarks leaves investors stuck with the blue chips
New product issuance in Europe could dry up as result of overbearing new rules, says Graf
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.