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Issuers
Crossover repricing likely with rising default rate, says BNP Paribas
Wednesday, October 21, 2009
Contending that the risk premium in iTraxx Crossover is shrinking quickly, BNP Paribas analysts point to the possibility of repricing should default rates surge beyond rating agencies’ current estimates.
Assuming a 20% recovery rate and at 498 basis points, Crossover protection sellers will be compensated for a 27.8% cumulative five-year default rate. However, Moody’s estimates a default rate of 28.4% in a pessimistic scenario, and a repricing could occur, analysts say.
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Funds
Structured
CFlux secondary
CLO index levels:
| Index | 6 Feb |
|
| CFlux USD AAA | ↑ | 94.9 |
| CFlux USD AA | ↓ | 81.3 |
| CFlux USD A | ↓ | 75.0 |
| CFlux USD BBB | ↑ | 74.8 |
| CFlux USD BB | ↑ |
72.1 |
| CFlux USD EQ | ↑ | 67.6 |
