Creditflux Newsletter

Fishknife has decided to mark Creditflux’s 10-year anniversary by looking forward instead of back. This is largely because I would prefer not to revisit some of the wildly inaccurate predictions I made in the past. 

It is also because I recently managed to dive headlong through a narrow gap in the space-time continuum to attend a brief meeting with a decade-older old codger called Fishknife, who moaned about raucous music, anti-social behaviour and cyclical credit markets.

Luckily, I did manage to mug him for an issue of Creditflux before I was thrown back to the here and now, and it turns out  the future is a vibrant place for debt, with opportunities to invest and trade in credit opening up in many unlikely places. There are well paid jobs for all Creditflux’s readers and even some new ones.

Here are some of the key headlines from September 2021:

The Globoxx corporate credit index recently blew out to an all time high of 3,000 basis points after the collapse of the rare earth mining company bubble. Spreads have now tightened on thin volumes to around the historical norm.

The signing of the international trading transparency accord in 2019 means that all corporate bond trading now takes place on open electronic platforms, with prices disseminated to the market within 30 seconds of trades taking place. It is estimated that 90% of bond trading is executed in Andorra.

Asian CLO issuance has fallen back to 2013 levels after the region briefly became home to the world’s biggest CLO market. Investors have threatened lawsuits against the once dominant Chinese rating agencies after many deals suffered multi-notch downgrades. The rating agencies admit they failed to anticipate the catastrophically low recovery rates on “shared lien” loans, but say that investors should have done their own homework.

In the US, implementation of the Dodd Frank act has been delayed for a seventh time. Market participants expect that central clearing of vanilla credit default swaps will become mandatory in 2022.

Trees & Stones Capital Management is the world’s biggest credit asset manager after a succession of mergers on the buy side. Critics say that its returns are no better than the market average, but the west coast firm has become a favourite of US pension funds. The firm’s huge compliance department is the biggest employer in Detroit.

Traders are looking into ways of reviving the dormant sovereign credit default swap market after a steady decline in volumes. USA credit default swaps are currently quoted at 0.5 basis points offer-only, with Government of the Eurozone only marginally wider. The sovereign debt crises of 2011 and 2012 are long forgotten after most countries took the ingenious step of transforming the bulk of their government bonds into unfunded liabilities through so-called reverse baby-bonds.

Europe has become the biggest CLO market on Earth after the region’s surviving banks turned themselves into term-funded lending vehicles to comply with the continent’s increasingly harsh capital regulations.

Turkbank is struggling to stem an exodus of credit traders after losing its respected global credit head. The dealing firm is said to be losing its way after years of dominance in the credit market, as rivals such as Santander and RBC snap at its heels. Of the top credit derivative dealers from 2011, only Goldman Sachs remains a top-10 player.

Alas, some things never change.