Credit derivatives grow by 52% in first-half 2006, says Isda

The credit derivatives market is now worth $26 trillion notional after another six months of rapid growth, according to the International Swaps and Derivatives Association.

The notional amount outstanding of privately negotiated credit derivatives reached $26 trillion in the first half of 2006, up 52% from $17.1 trillion at 2005 year-end, according to Isda’s mid-year 2006 market survey, released at its regional conference in London yesterday. The survey covered credit default swaps on single names, baskets and portfolios of credit and index trades.

Robert Pickel, chief executive officer of Isda, said the figures showed that “the slight slowdown in the second half of 2005 was just a breather, as the growth has well over doubled from mid-year 2005.”

The year-on-year credit derivatives growth rate of 109%, from a mid-year 2005 figure of $12.43 trillion, rises above significant growth in other asset classes. The notional outstanding amount of interest rate derivatives grew by 18% to $250.8 trillion, equivalent to year-on-year growth of 25%.

Interest rate derivatives volumes, which include interest rate swaps, options and cross-currency swaps, grew by 6% in the second half of 2005, following 10% growth in the preceding six months.

The notional outstanding volume for equity derivatives, comprising equity swaps, options and forwards, grew steadily by 15% to $6.4 trillion, representing year-on-year growth of 32%.