The WSJ seems to know a lot about the JPM CIO’s credit portfolio.
They claim that the CIO has about 100bn face of index, which is around an eighth of the cleared open interest (there will be some amount that is not cleared).
Apparently they have a credit flattener – they sold long dated protection and purchased short dated protection – and are hanging on hoping it comes good.
Mr. Dimon said last week that:
“The portfolio still has a lot of risk and volatility going forward.…We’re willing to hold as long as necessary inventory and we’re willing to bear volatility.”
If i had that much risk, the wrong way around, i would not want the positions on the front page of the journal.
I expect that, for all their brave talk, they stop out of these positions. The market has a way of doing what hurts the most.