Street Cred - Judgement day
Our new US column, StreetCred, suggests there may soon be a day of reckoning for the structured credit market
"Spreads are going to zero," screamed the Bloomberg banner of a correlation trader at a major Street dealer recently. The trader drew his conclusion from the recent surge in demand for the equity risk of synthetic CDOs. The theory goes that this new demand, along with the seemingly unending demand for mezzanine and leveraged super senior (at increasingly paltry returns), produces a synthetic capital structure with no parts left vulnerable to rupture. Consequently, with appetite healthy for all
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