April 17 (Reuters) – JPMorgan Chase, Barclays and other Wall Street banks have started trading credit default swaps linked to flagship private credit funds run by Blackstone, Apollo Global and Ares Management, the Financial Times reported on Friday.
Banks including Morgan Stanley and Citigroup were offering to trade contracts on the three funds, the FT report said, citing people familiar with the matter.
Reuters could not independently verify the report. JPMorgan, Barclays, Morgan Stanley, Citigroup, Blackstone, Apollo Global and Ares did not immediately respond to a Reuters’ request for comment.
Credit default swaps (CDS) are derivatives that act as insurance against the risk that a bond issuer – such as a company, bank or government – fails to repay its debt.
Private credit funds are facing their most serious stress test since the sector’s rapid expansion following the 2008 financial crisis.
The news comes as S&P Dow Jones Indexes launched another credit-default swap index linked to the private credit market last week, giving investors a tool to bet against a sector that has faced turbulence in the last few months.
(Reporting by Chandni Shah in Bengaluru; Editing by Mrigank Dhaniwala and Sherry Jacob-Phillips)
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