Latest News:
news, comment, analysis and data on the global business of credit trading and investing
Structured
Bank writes down CSOs to zero
Singapore’ OCBC Bank wrote down its corporate CDO portfolio to zero, taking an additional SGD94 million ($63.92 million) allowance in the first quarter. Its total investment in corporate CDOs was SGD205 million and it had invested SGD100 million in CDOs of ABS. Both portfolios have now been written down to zero.
The bank’s write-down of its corporate CDOs, which are thought to be CSOs, is unusually severe, possibly indicating that the trades were done with unusually low attachment/detachment points. The bank has not given details of what these CDOs are. However, it was quicker than many banks to write off the entirety of its CDOs of ABS, marking them down to zero early last year, suggesting a more conservative accounting policy than the norm for an Asian bank.
Related stories
- Citi looks for tight pricing on new managed CLO 6 days ago
- Fitch trups CDO change will lead to new wave of downgrades 8 days ago
- Managed CSO trades in the secondary market 1 year ago
- Managed synthetic CDO prices two liability structures 3 years ago
- Pricing software adds latest modeling concepts 3 years ago
let's see -- a very complicated product, with limited market liquidity (under the best of circumstancea), underlying models are still in (I'll be kind)formative stages, rating models continue to be in a state of flux. The product will be dead for quite some time; and probably should be!
There is no demand for CSOs at the moment. Investors are buying corporate bonds, plain, they offer good enough spreads. The reason why they were punting on CSOs was that credit spreads were very low, iTraxx went down to 20bps in 2007. Even worse for the future, spreads these days are coming down way too quickly and corporate defaults, apart from financials, still very low. Worst case scenario if in 6 months spreads go down to almost where they were in 2007, with CSO pipeline still dreadful for the lack of investor appetite and CDO managers
What do readers think about the future of CSOs as an investment product for banks and real money investors? Does anyone see demand for the product returning?