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Dubai CDS Jumps On Ongoing Sovereign Worries, Now At 518 bps
Now that every trigger happy, red-bull OD'ing HiFTer is keenly following every lockbox in possession of Greek bureaucrats to see how many billions more in debt will "suddenly" appear out of thin air, many have forgotten about that "other" sovereign bailout - Dubai. The reason: Dubai World, which was supposed to present a restructuring offer for $22 billion in debt in a meeting with lenders in December, never did. January wasn't any different. February, by the early looks of it, will also be a dud. So as the world grinds along and creditors have no clue what the hell is going on in Dubai, and increasingly so in Greece, everyone has their fingers crossed that not only will there be no default anywhere, but that anyone who dares to mention just what a great big castle in the air the entire sovereign debt arena has become, funded by overt and covert cash transfers by the Federal Reserve, will be (in)voluntarily swept under the rug.
Unfortunately for the Xanaxed conventional wisdom, CDS traders tend to not enjoy the view from under the rug, and are making their presence felt. The result: Dubai CDS, since the Thanksgiving crisis, has crept 25% wider from the lows in the low 400s, and is now at 518 bps. Dubai still has a commanding lead over Greece, although the 100 bps advantage seems rather tenuous. We expect this race to the sovereign default bottom to become much more exciting once everyone's cards are on the table, and both the Petrodollars and Europe acknowledge that without Bernanke subsidizing a global bailout, things are about to become a whole lot worse.
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the whole world is bailouted by Benron, while stocks,oil,gold are rallying.
Sick world.
Epic fail coming to a theatre near you. Anyone long equities right now hoping for an additional 1% of HFT/Blackrock/GS driven gains is about to get smoked.
Timeframe?
within a week
agreed
I think there will be a big plunge starting next week
Hope you're right. I'm still net short at the moment, but this looks a lot like last summer to me.
*edit*
...and we just punched through 1100
well according to a good tech analyst machugh
he thinks this is justs a small corrective wave
from last weeks losses. Then when it complete in abut a week
we should see a nasty plunge as part of a grand catastrophic wave down.
what a complete house of cards
The only thing left proping the doelarr is how bad dudes messed up. 79 might be the high btw. and if it is, ask yourself if you feel lucky.
Bye bye dubai, arividerci greece, and the Samurai and Brits are next. then the US. end of story.
I think you may be too bearish on the dollar lennon
I think it will go a lot higher as debts leveraged in dollars are defaulted on or payed back. just like in 2008
3 years from now though or so AFTER delevaraging ends all paper will be toast
Dow zero by 2012
But, but, but...Dubai is all okey dokey i thought? I mean, once it goes out of the news, doesn't that mean that everything is fixed and green shootiness?
Newbie question here...
Can someone tell me what it means to have the CDS at '400' (or 300, or 500...) basis points?
Thanks :)
Newbiw question here...
Can someone tell me what it means to have the CDS at '400' (or 300, or 500...) basis points?
Thanks :)
Newbie question here...
Can someone tell me what it means to have a CDS spread of 400 (or 300 or 500...)
Thanks!
Can someone tell me how a CDS spread is calculated?
Thanks
Robot Trader?? the only training should be given by Robot Trader and his pics...
The bps paid is the premium for protection. Only in the event of an event (read: default) is the buyer fulfilled with his 'reward' which is the obligation of the person selling the CDS and getting the bps as profit (originally). If no event occurs within a set time frame (though time not always included in said contracts), then the contract closes out. Otherwise, it is settled based on the event.
As for calculating a spread, a simpler way to look at it is
Riskless investment = investment in risky bond + CDS. so your yield = [risky bond y - CDS spread]
If you want to know the actual mechanics for it you need the particular recovery rate of the entity (what are bonds worth in case of said event) and the unconditional default prob. Knowing the term structure would help if you needed to calculate the CDS over a longer time frame.
Hey, It could be worse right?
and if everybody fails, the one that fails the least is the winner! :)
Long live America! :)
Your patriotism will be well rewarded in the next world when you offer up your pensions to save the mighty dollar
Thank you gentlemen , the future of the global financial system is in your 401ks
Good thing Obama implemented some serious spending freezes... you know... so this could never happen to the US.
I totally feel this rage:
Spending Freezes Obama Style
Sarcasm >on<
Good thing for Obama's spending freeze... so that won't ever happen in the US.
Sarcasm >off<
I feel the rage like this guy: http://catharticranter.blogspot.com/2010/02/spending-freezes-obama-style.html
"A formal standstill agreement with Dubai World's 97 creditors may never materialise as long as the conglomerate keeps servicing interest payments and presents a concise retructuring plan by the end of April.
The biggest looming deadline is May 13, 2010 -- the maturity date for a $980 million Nakheel Islamic bond, or sukuk." - Reuters
http://www.reuters.com/article/idUSLDE6100D620100202
Dubai World will need to offload assets to help meet pending debt obligations. The company has already ring-fenced prized possessions such as DP World DPW.DI and luxury hotelier Jumeirah Group.
The first asset to hit the auction block will likely be Inchcape Shipping Services (ISS), one of the world's biggest marine management firms, which has already been prepared for sale prior to the Nov. 25 announcement.
I still think fellow neighbor Abu Dhabi will bail them out. I think the Abu Dhabi govt. wants to see the Dubai govt. "squeal" just a little bit more. Unilke the USofA which is broke, Abu Dhabi has hundreds of billions of dollars.
This is my take on the subject of sovereign default: Safe Assets and Sore Surprises (quoted you on the "risk premium" technical term). Statistics on the subject: Reference List. Check it out and if you miss something, feel free to leave a comment.
I think we should set up a bullsh*t default swap
there is so much bullsh*t around it seems to be the only thing growing along with debt and must be tradeable.
You could have bernanke starting out at the top at 500 BP.
Maybe obama at 400