19 April 2018 by pdonnat
European synthetic credit market added in March 11 new high yield reference entities to its trading catalog. The new names represent 11 out of the 12 additions to the new series of the European Crossover index. The last one addition is a fallen angel (TDC A/S). After a month, the roll was march the 20th, the trading of these new names is still rather subdued and a sort of disappointment for market participants. It is hard to assess the true activity. The tip of the Iceberg is the reported cleared volume by LCH CDSCLear, the only CDS clearing house offering to clear these new names. Out of the 11 names, WIND TRE S.P.A. and Verisure Midholding AB are the only one with reported open interests as of yesterday according to OTCStreaming. Some of the new names are well known special situations in the European high yield community. These entities have large bond issues like Picard Bondco S.A. with a 1.2BEuros 5Y FRN issued late last year. But the derivatives community is not familiar with these names especially due to the lack of time series. DataGrapple infers for these entities an alleged time series using the "best" benchmark. The choice of the benchmark is not obvious. In some situation a benchmark is not relevant. For STEINHOFF EUROPE AG, Datagrapple team decided to use NEW LOOK SENIOR ISSUER PLC as the best proxy to backward infer a time series (see the attached the grapple). DataGrapple provides estimates for all the new CDS entities, hopefully it helps to make some rough estimate of their risks.