The US bank pointed to names from the banking sector in the UK and Ireland as an area where investors could find particular value this year. For example, structures referenced to the senior debt of UK retail banks and building societies appear to be relatively unleveraged compared with most FTDBs.
In broad terms, yield tends to increase as basket default correlation decreases. “Many investors are accessing FTDB structures via credit-linked notes,” French said. “Though for shorter investment horizons, a swap is more sensible,” he added.