Economics & Strategy – Credit Derivatives: Second

A second-place debut in this or any other sector is impressive by almost any standard except perhaps the one set by James Reid’s Deutsche Bank team, which is No. 1 in General Strategy, High-Yield Strategy and Investment-Grade Strategy. The London-based trio “blends great anecdotal evidence into its analysis,” according to one buy-side supporter. “And Jim has an ability to look back and put today’s events in the context of economic and financial history.” Given the European Union’s ban on taking speculative positions in credit default swaps, which went into effect November 1, “the biggest issue is what form this market will take over the medium to long term,” Reid says, with much depending on “how successful the authorities are in calming the market — the more calm you have, the less additional regulation there will be.” In the meantime, the strategists are looking for anomalies in 3s5s curves — which involve a receiver three-year swap and a payer five-year swap — and highlighting single-name CDSs that were dislocated from the general trend of the curve at the five-year level. — Carolyn Koo