Swaps Reincarnate Boost Debt Bets

Financial innovation picks up as investors look for ways to boost returns.

Derivatives that helped inflate the 2007 credit bubble are being remade for a new generation.

JPMorgan Chase & Co. is offering a swap contract tied to a speculative-grade loan index that makes it easier for investors to wager on the debt. Goldman Sachs Group Inc. is planning as much as 10 billion euros ($13.4 billion) of structured investments that bundle debt into top-rated securities, while ProShares last week started offering exchange-traded funds backed by credit-default swaps on company debt.

Swaps ETF

‘‘The current state of play where yields are very low and there are more redemptions than issuance in certain assets, such as covered bonds, leave investors looking for innovative investment opportunities, so long as they pay up,” said Cristina Costa, a senior covered bond analyst at Societe Generale in Paris.

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