JPMorgan Recommends Betting on Utilities’ Credit Derivatives
- Credit default swaps on utilities have widened more than index
- Weakness in shares spills over to credit market, bank says
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Utilities have been hit too hard in the US credit derivatives market, and traders should position for the credits to recover, according to JPMorgan Chase & Co. strategists.
The cost of protecting a basket of utility credits against default has risen by 11 basis points this month, or 0.11 percentage point, to 89 basis points, the strategists wrote. Meanwhile, The price of protecting the wider market, as measured by the Markit CDX North American Investment Grade Index, has only risen 1 basis point to 74 basis points.