The credit factor
fixed income
As spreads come under increasing pressure from the
contagion which has hit all markets at least to some extent,
the need to factor credit into an investment strategy is
becoming ever more crucial.There is clearly a growing need
among both institutional investors and our own professionals
to understand the implications of the contagion spiral on
spreads and the now very strong recovery in asset prices. In
response, Hung Tran, head of global research, and his team
organized a conference aimed specifically at exploring the
current credit environment and its outlook.
More liquid
Diminished appetite
What sNewS Issue 4 'April 1999
Organization team, Kerry Gore and Ellen Hearn (right), help
Mark Northway finalize his presentation on derivatives
The conference was short-notice, but well attended
Pleased with customer response - Hung Tran in the chair
Covering global credit markets - Suki Mann (left) explains
RTs position to a customer
Although organized within
the space of six weeks,
the response from clients,
especially the smaller Dutch
pension funds, was
overwhelming. No less than
130 interested participants
joined the conference in
Noordwijk. Hung Tran and
Suki Mann, head of fixed
income credit research, had
been able to hring together
an equally high calibre group
of speakers, including senior
representatives from hoth
Moody's and S&P, and from
Robeco. The aim was, in
part, to show off Rabobank
International's (Rl) own
expertise in this increasingly
important area. Our own
economists covered the
current hot spots of Central
Europe, Eastern Europe,
Latin America and Asia.
Robeco's Edith Siermann
discussed investment
approaches for credits which
allowed her to promote the
asset manager's new credit
fund at the same time.
yield market; S&P looked at
hoth the global sovereign
outlook and European local
and regional governments.
One customer commented
that the conference was 'very
timely'. There is, another
pointed out, a severely
diminished appetite for risk, a
factor Suki Mann had picked
up on in his presentation on
global credit markets. Clearly,
there is a need for knowledge
sharing with customers. The
market continues to be
volatile, with potential risks,
such as devaluation in China,
a Brazilian domestic debt
moratorium, and ongoing
concerns for Asian recovery
prospects. This type of
conference allows Rl to
position itself as a deeply
knowledgeable institution in
this and closely related fields
- specifically the new area of
credit derivatives.
These products are so new, in
fact, Mark Northway of Rl
called his presentation 'Credit
derivatives -
inexorable growth', but what
are they? He went on to
explain why this particular
market is growing so fast,
quoting a recent BBA survey
which found 'the Asian crisis
has brought credit derivatives
to the fore and allowed the
market to demonstrate its
maturity and worth. At times,
credit derivatives have proved
to be more liquid than the
underlying assets.' In a
dynamic market environment
where the demand for
liquidity is increasing and the
appetite for risk declining
apace, establishing Rl as both
expert and ahead of the field
in such product applicaitons
can only enhance our
reputation in the market.
If you would like to know
more about the topics
discussed at the conference,
please contact Suki Mann in
London by email at
manns@Rabo-bank.com or
tel. +44 171 664 9841.
The rating agencies focused
mainly on Europe. Moody's
explained its view on both
the European banking
outlook and the region's high-
