Barcap highlights trading opportunities around guarantees

In a report entitled "What's a guarantee worth (for CDS at least)", Barclays Capital recommends buying protection on Rohm and Haas at recent levels. At 140bp, the company trades tight in the credit default swaps market relative to its new parent company Dow Chemical (440bp).

Dow's guarantee of Rohm and Haas is one highlighted by the report as clearly failing to meet the definition of a qualifying guarantee under credit derivative definitions. Similarly, Anadarko's guarantee of Kerr-McGee is probably not treated as a guarantee under credit default swaps.