BNP Paribas offers trade in credit

BNP Paribas has launched the Hedge Bond Certificate, which is designed to profit from the difference between yields on corporate bonds and the cost of protecting the debt from default - called negative basis.

BNPP buys a bond from, say, a triple-A rated issuer and at the same time takes out a credit default swap (CDS) against that bond. The product takes advantage of a pricing market in which CDS can be cheaper to buy than a bond on the same credit - the investor gets the difference, after BNPP

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