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Whale’s Trade in Comeback as Junk Fervor Fades: Credit Markets

Nine months after the JPMorgan Chase & Co. trader known as the London Whale amassed credit-derivatives bets that sparked $6 billion in losses for the bank, rivals from Bank of America Corp. to Morgan Stanley are recommending one of his main strategies.

Morgan Stanley analysts included among their top 13 trades for 2013 a bet that the cost of credit derivatives protecting against losses on junk bonds will get more expensive relative to investment-grade debt as sluggish growth fuels more corporate defaults. After the difference between the measures plunged to a 14-month low in September, Bank of America credit trader Kavi Gupta wrote in an e-mail to clients last month that the so-called decompression trade was his favorite strategy.