A Big Junk Bond Trade

May 22, 2012 8:30am by

Bloomberg.com – Junk-Debt ETFs Set Markets ’Abuzz’ After Record Trades
The biggest trades on record in shares of two exchange-traded funds that invest in junk debt are attracting attention to the four-year-old market that allows anyone from banks to retirees fast and discreet access to speculative-grade bonds and loans. The transactions were completed hours before JPMorgan Chase & Co. disclosed $2 billion of trading losses tied to credit derivatives, an announcement that has heightened attention on big trades in debt markets … A May 10 trade brokered by Cantor Fitzgerald LP at 2:42 p.m. in New York created about 4.5 million new shares in the PowerShares Senior Loan Portfolio (BKLN), Bloomberg data show. The trade, which fueled the highest daily volume for the 14-month- old $565.5 million fund, was valued at about $110.3 million. Earlier that day, an investor exchanged as much as 19.7 million shares in the SPDR Barclays Capital High Yield Bond ETF (JNK) for the equivalent of about $779.3 million in bonds, Bloomberg data show. The redemption, the biggest since the $11.2 billion fund was started four years ago, came after the investor had accumulated shares over several weeks, according to Knight Capital Group Inc., which brokered the trade.

Comment

We are highlighting this story because we get the feeling this is not a one-off trade and the final word on this has not been written.

Source: Bianco Research

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