HALISTER1: China Needs to Widen Access With Credit Default Reforms: SocGen

China Needs to Widen Access With Credit Default Reforms: SocGen

(Bloomberg) -- China’s re-introduction of a credit-default swap market should be seen as an “upgrade and refinement” to what it had, said Societe Generale head of Asia ex-Japan rates strategy Frances Cheung.
  • SocGen would look for changes including:
    • Flexibility in terms of access vs current three-tier system of participants
    • Flexibility for trading purposes
    • Leverage ratios to be relaxed, including the percentage of outstanding referenced bonds or loans each dealer can net purchase or sell
  • Cash bond market is not efficiently priced, which however is required for efficient pricing mechanism for credit risk markets
  • NOTE: PBOC last Friday approved rules governing CDS trading as buffer for more defaults
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Frances Cheung (Societe Generale SA)

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