US credit default swaps and CLN markets recovering, says S&P

The US credit default swaps (CDS) and credit-linked notes (CLN) markets are recovering from a lull in activity, according to rating agency Standard & Poor’s (S&P).

“Activity began picking up at the end of the second quarter,” said Mary Ryan, a New York-based credit analyst in S&P’s structured finance ratings group. “Based on what we are hearing from the market, a number of transactions are expected through the end of 2003. By year-end, CLNs and CDSs should be a greater percentage of our business.”

S&P reviews credit derivatives either to assign a rating to a CLN or to review a CDS being purchased to be used in a collateralised debt obligation (CDO). The latter is termed assigning a ‘credit estimate’. S&P said that in the first half of 2003, the percentage of credit estimates it provided was 16% of total synthetic transactions. In the first half of 2002, credit estimates made up almost 55% of activity.

“Part of the decline could be attributed to the uncertainty that FIN 46 cast on the CDO market,” said S&P. The US Financial Accounting Standards Board (FASB) issued financial interpretation number 46 (FIN 46) in January. The ruling clarified earlier US accounting policy changes related to special-purpose entities (SPEs). Its objective is to improve financial reporting and disclosure by companies involved with variable rate entities, a broad term used by FASB to incorporate most SPEs.

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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here