
Japanese CDO market shrinks in 2008, says Moody's
The balance sheet deals totalled ¥729 billion, up 6.9% on 2007 volumes due to an increase in the size of portfolios referencing loans to small and medium sized entities (SMEs). The arbitrage deals accounted for ¥249 billion.
Moody's downgraded 34 tranches on arbitrage CDOs last year, most of which referenced global names that suffered credit events such as the US government sponsered entities Fannie Mae, Freddie Mac, Lehman Brothers, Washington Mutual, Tribune Company and the Icelandic banks - Kaupthing Bank, Glitnir Bank and Landsbanki Islands. The agency also changed 86 ratings assigned to repackaged deals.
Moody's believes risk management and funding benefits will drive issuance of balance sheet CDOs by Japanese financial institutions in 2009. But the agency reckons "only a limited number of SME CDOs will likely be structured considering the current situation of rising SME defaults".
Market sentiment towards arbitrage deals will remain poor, as it is elsewhere in the region. "Demand for the arbitrage CDO market may remain limited in 2009, as investors are likely to remain cautious," the agency said. However, the agency said simple credit-linked notes referencing one corporate name "will likely draw investors' attention".
Moody's added that no balance-sheet CDOs referencing Japanese corporates had suffered a credit event. But that situation may be set to change. "We need to keep in mind that a growing number of Japanese companies, facing a severe business environment due to the weak global economy and a strong yen, have been downgraded," Moody's said. Additionally, "some Japanese SME CDOs may also be downgraded".
See also: Guilty or not?
Death by CDO
Ratings down and defaults up at Moody's
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Structured products
Regulation
French regulator questions need for share trading equivalence
Esma’s reinterpretation ahead of Brexit reduces need for equivalence system, says AMF official
Receive this by email