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The credit trap

Tentative moves back to credit-linked structured notes were disrupted in March by rises in sovereign default premiums. Credit default swap prices even forced Landesbank Berlin to withdraw a credit-linked product from the German market. So is credit still too risky, even for sovereign exposure? Sophia Morrell reports

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Credit is widely perceived as the root of the financial crisis, prompting a complete shift in attitudes during the past year. The burgeoning market in structured finance 18 months ago - when products such as constant proportion debt obligations were in the pipeline - has been stopped in its tracks, and the products are now anathema to banks wary of the public's attitude towards exotic debt

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