JP Morgan Chase and Morgan Stanley launch Trac-x Australia

JP Morgan Chase and Morgan Stanley launched the Trac-x Australia index today, the latest addition to the Trac-x global suite of credit default swap indexes created by both firms.

Pricing of Trac-x Australia began at noon Sydney time. “We have executed a few trades already and have encountered numerous organisations interested in the product,” said Russell Taylor, head of credit sales for JP Morgan Chase in Sydney. The coupon has been set at 30 basis points and closed at the end of the first day at a 30.5/31.5 market.

Trac-x Australia consists of a basket of 25 equally weighted credit default swaps referencing the most actively traded Australian corporate and financial names. It is expected to generally reflect the performance of the Australian high-grade credit market. The first series of the index, launched today, has a stated maturity of March 20, 2009. The firms plan to release new series of the index every six months.

“We have brought the index to Australia to meet the growing demand by fund managers to track general trends of the Australian credit market - they wanted a liquid, investment grade and diversified vehicle for managing their exposure to the Australian credit market,” explained Taylor.

Trac-x Australia can be used as a liquid vehicle to gain or hedge exposure to broad Australian credit, as well as to track the performance of credit derivatives portfolios and as a basis for unbiased structured products.

“Trac-x is rapidly becoming the benchmark around the world for trading corporate credit, delivering efficiency, liquidity and transparency to investors. We are confident Trac-x Australia will bring benefits to Australian capital markets and their users, attracting interest from both onshore and offshore investors,” added Richard Cohen, Tokyo-based vice-president, Asia-Pacific credit derivatives trading at Morgan Stanley.

Morgan Stanley and JP Morgan Chase announced their intention to combine their suite of globally traded CDS indexes on April 1 2003. Since then, the two firms have created Trac-x Europe, consisting of 100 names in the European CDS market; Trac-x NA (North America), comprising 100 names in the US CDS market; Trac-x NA High Yield, which consists of 100 high-yield names; Trac-x Japan, which references 50 investment-grade Japanese corporate credits; and, Trac-x EM (emerging markets), referencing a pool of emerging market sovereign credits.

Trac-x is available to all market participants on Bloomberg and the websites of JP Morgan Chase and Morgan Stanley.