Dealers draw up contract for covered bond CDSs
Credit Suisse, Deutsche Bank and JP Morgan expect demand for spread volatility protection on covered bonds
Covered bonds could get their own credit default swap (CDS) market, if a new template drawn up by Credit Suisse, Deutsche Bank and JP Morgan takes off. Although the bonds rarely default, the three dealers have been quietly working on the project for almost a year, and expect demand to come from investors seeking to hedge spread volatility on what is a rapidly growing portion of the bank debt market.
"To promote liquidity, we wanted to agree a standardised form of contract. We didn't want to draw
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