BNP Paribas tailor-makes Japanese CDS index

French bank BNP Paribas has created a sub-index to its CJ50 index of the 50 most liquid Japanese credit default swaps (CDS). Called CJ Flex, the sub-index is referenced on about 30 investment-grade credits, worth a total notional amount of more than ¥10 billion, chosen from the CJ50 pool of credits.

The first sub-index, CJ Flex Series 1, was customised for one client, “a large financial institution based in Tokyo”, according to Tokyo-based senior structure Go Yajima. The portfolio of 30 credits was specifically tailored for the needs of the client, he said. BNP Paribas will provide bid and offer prices at the client’s request.

Yajima noted that, given interest expressed by other clients to buy protection at current tight CDS spreads, the bank expects to structure more sub-indexes going forward. “Given current spreads in Japan, we are seeing more participants thinking it's a good time to buy protection,” Yajima said.

The CJ50 index was created in July. The index is quoted once a week, based on CDS prices quoted from BNP Paribas, Goldman Sachs, Mitsubishi Securities, Crédit Lyonnais, UBS, UFJ Bank, Bear Stearns and Aozora Bank.