Once upon a time, I used to get decent allocations on corporate bond issues. Now I'm getting zero on practically every new deal. One problem is that with all the turmoil on the Street, my coverage at the wirehouse firms has been a revolving door. I'm wondering if anyone out there has insight on the following: assume we're dealing with a pot deal... to what extent does the bond allocation process depend on the end salesperson, and to what extend does it just depend on the pull of the account itself?

I am not sure on the allocation weighting per se but we see/hear simply a greater number of requests for allocation since buyers are either flipping (catch the hot potato) or getting propped basis trades on new issues that can look extremely attractive (basis and liquidity crunch issues aside)

CreditTrader,

do you say that new issues are trading with a significant negative basis (CDS-ASW/Z)? I thought that the demand side for funded products (bonds) was recently improving...(?)

I would appreciate if you could summarize the basis situation in the past 3 month in general, e.g. is it getting normal etc.

We've been getting decent allocations lately, typically about 1/3 of what we put in for. Seems to me like you might be getting the short end of the stick involving salesman turnover, I know I've definitely found better allocations at the shops where my older coverage is still around.

In answer to the basis question, we haven't been involved with the recent new issues but the BDK deal came with a -475bp basis back on 3/31. I believe recent issues have been similar. JPM's high grade CDS-Bond Basis is around -180bps, for reference it was about -260bps in late 2008.

Great idea for a forum, I'm looking forward to some great discussions.

thank you.
these are amazing numbers. i left credit derivatives markets after 10 years in 2007 so this is close to insane to me (2002 was nothing compared to that).

i wonder with all that talk about melting credit crunch why is there such a huge discount for funded (CDS) covered strategy. i guess most market participants fund at a significant mark up to LIBOR therefore preferring the unfunded strategy to go long credit by selling protection (pulling basis tighter). But these numbers [-300bps] are still insane. majority of participants in CDS market are banks and insurance companies - and i can't imagine these fund at something like LIBOR+300 on average.

looks like banks are still hoarding cash by selling any bonds they have on balance sheet, i.e. it is going to get worse before it gets better...

p.s. does anybody have any research summarizing the recent level/changes in basis for a set of major credits? (any research department should produce something like that weekly). cheers

I tried to get a client an allocation of the Whirlpool issue today, and got bupkiss... Everything that comes down the pipe is massively oversubscribed.

AI, are you seeing any improvement? I have started to get better allocations, XRX and KMP I got filled up... Didn't look for any DOW...

Didn't put in for those. Got shut out of BK.

accruedint wrote:Didn't put in for those. Got shut out of BK.

Got shut out of the AXP deal from a few days ago... I thought I would get filled considering the size.