Synthetic CDO's: they're baaaaack

Livewire News

Synthetic CDO's: they're baaaaack. Last month Citigroup placed an unusual job advertisement. The bank was seeking an analyst able to crunch numbers on an obscure financial security: synthetic collateralised debt obligations. These are the same instruments that got us into the big mess of 2008. Four weeks later, job applicants would find the position filled. Such has been the clamour among investors for the higher yields from higher-risk products that big banks including Citi, JPMorgan Chase and Morgan Stanley are turning again to the more esoteric parts of the financial markets. These bankers are hopeful that, once the dust settles from the Fed taper, investors will feel more comfortable buying investment-grade credit at higher interest rates and, moreover, leveraging the returns against a low risk of high-quality companies going bust. Read more: (VIEW LINK)


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