- June 2, 2010
BP – Bigger Prices – on CDS
According to Bloomberg, British Petroleum credit default swaps are again soaring in early London trading today, this time jumping 52 bps to a new record high of 220 bps. Since the US Memorial Day weekend holiday ended, BP CDS are double the approximate 100 bps level from May 28, 2010.
This is after BP CDS soared 67 bps yesterday according to Bloomberg, 71 bps according to Reuters, and 68 bps according to Barron’s to a then-high of 168 bps, 173 bps, and 170 bps respectively, while the US-traded ADR stock crashed 15% to $36.52 after the failure of the latest top-kill operation to stop the oil spillage in the Gulf led to expectations that the damage will continue until at least August.
Trading in BP’s London shares is also down as much as 3.5% trading as low as 416.2 pence during the morning session so far. Yesterday’s drop was its biggest one-day drop since June 1992. Luckily, ZeroHedge reports that Goldman Sachs Asset Management was not one of the biggest losers.
CDS in other related companies are also significantly higher. Transocean CDS was up between 148 bps and 200 bps to either 400 bps or 405 bps yesterday, depending on sources. Similarly, Halliburton CDS was up between 47 bps and 53 bps to 126 bps or 130 bps yesterday, and Anadarko Petroleum CDS was up between 139 bps and 160 bps to 30 bps or 290 bps yesterday.
BP corporate debt and bonds are also trading much wider. Bloomberg reports that BP’s credit spreads are at 148 bps over government benchmarks compared to the 77 bps spread for similarly rated Aa1 debt. Before the oil spill in March, BP’s credit spread was only 39 bps.
Specifically, “The spread on BP’s 500 million pounds of 4 percent bonds due in December 2014 widened 9 basis points to 109 basis points, according to HSBC Holdings Plc prices on Bloomberg. The spread on its 1 billion euros of 4.5 percent bonds due 2012 soared 64 basis points to 235 basis points, according to HSBC.“