Weekly: Sovereign CDS very active

Sovereign CDS dominated the past week of trading to a greater extent than in previous weeks with 17 of the top 18 most active names.

EU moves to ban naked CDS

Monday’s 34-8 vote in favour of banning naked CDS has drawn sharp criticism from derivatives users.

Commerzbank CDS reaches new record high

It has not even been 2 weeks into the new year, and yet another bank has experienced an enormous increase in its traded credit risk.

Ukraine & Latvia see biggest fall in credit risk

As measured by sovereign CDS over the year according to CMA Datavision.

Western European nation CDS rises past the east

Credit default swaps on western European nations has exceeded that of CDS on central and eastern European, Middle Eastern and African nations for the first time according to the WSJ.

The role of Counterparty Valuation Adjustments (CVA’s) in rising sovereign CDS levels

A recent report published by the Bank of England (BoE) cites “increased hedging by CVA desks has been an influential factor behind these [rising European sovereign CDS price] moves.”

First bond yields, now Illinois CDS overtake California

We began the week reporting how bond yields on Illinois State general obligation debt had overtaken similar bond yields on California State debt so it probably isn’t a surprise to end the week reporting how Illinois credit default swap prices have now also overtaken California credit default swap prices. Illinois is now the highest priced (high price implying riskiest or most likely to default) municipal entity in America.

Investors are clearly worried about the state of this state’s finances and other impending issues including a teachers pension fund that is underwater and trying to swim back to shore carrying anchors tied to the creditworthiness of companies and sovereign states like MetLife, Brazil and Korea.

Portugal Next?

Based on the performance of a variety of financial instruments (including credit default swaps) referencing or related to the financial condition of Portugal and Portuguese-related companies especially the banks, it appears investors are expecting/preparing/betting/hedging for the worst to hit Portugal next.

ISDA’s 25th AGM concludes without a big bang

The International Swaps & Derivatives Association (ISDA) just completed their 25th annual general meeting last week in San Francisco with much less fanfare compared to last year’s meeting in Beijing that closely coincided with the implementation of the Big Bang Protocol.

Sovereign CDS’ role in the changing dynamic between (interest rate) swap spreads

In the holiday shortened Easter week as the kids of financiers were on easter egg hunts to find the candy creme egg laid by their Easter bunny friends, their parents were on financial and economic information hunts to validate their butterfly trades. Come Easter Monday, religious watchers of (interest-rate) swap spreads are still watching for rates to rise from the dead to correct an imbalance that at least mathematically cannot continue to exist under old historical and theoretical frameworks – frameworks that never included the credit default swap.