Sovereign CDS

Tyler Durden's picture

Sovereign CDS Update - Bloodbath





Gold mania has now moved to sovereign CDS, where the top 5 names are flying again. Biggest movers are the usual suspects: Dubai, Greece and Latvia. As Zero Hedge has been saying since it hit about 22 bps, CDS on the United States will soon likely see a replay of 2008 action. As of today it traded at 36, 2.5 bps wider. And when this starts really moving, watch out.

 
Tyler Durden's picture

Dubai Sovereign CDS Surges 130 bps As Dubai World Seeks Debt Standstill





Trader commentary:

The widening of CDS spreads on Greek Sovereign debt has caught some attention and now Dubai CDS spreads are on the move: Commentary on Dubai from the EM guys...Dubai in focus as they do another $5b local tranche in the $20b Abu Dhabi program, then ask for extension in Nakheel maturities for 5 months. Very strange. Thought whole point of issuing the bonds was to pay for the Nakheel debt. Dubai CDS +130bps from o'night level of 318 ... seems to be hitting the European markets now.

Sequential popping of bubbles to commence shortly.

 
Tyler Durden's picture

Sovereign CDS Are On The March Again





With today's news out of Ukraine, which may or may not be a dud (although with the economy hardly functioning courtesy of massive quarantines and business shut downs) sparking off what may or may not have been a a huge dollar squeeze (we are still waiting to hear back from the ICE), one observation is that sovereign CDS spreads are back front and center. As we discussed recently, Japan CDS has been ploughing ever higher, yet recent data indicates that the deflating island nation is not alone.

 
Tyler Durden's picture

Sovereign CDS As A Proxy For Relative Risk





Interesting observation, correlating the ratio of US to Japan CDS (especially with Japan CDS' tightening 7 bps while USA CDS was 2 bps wider) versus the JPY/USD (inverted axis). Is the sovereign risk trade trying to find other conduits for expressing relative risk in this environment where no sovereign risk seems to exist anymore as all countries are expected to print, print, print all their problems away.

 
Tyler Durden's picture

Sovereign CDS As A Proxy For Relative Risk





Interesting observation, correlating the ratio of US to Japan CDS (especially with Japan CDS' tightening 7 bps while USA CDS was 2 bps wider) versus the JPY/USD (inverted axis). Is the sovereign risk trade trying to find other conduits for expressing relative risk in this environment where no sovereign risk seems to exist anymore as all countries are expected to print, print, print all their problems away.

 
Tyler Durden's picture

Sovereign CDS As A Proxy For Relative Risk





Interesting observation, correlating the ratio of US to Japan CDS (especially with Japan CDS' tightening 7 bps while USA CDS was 2 bps wider) versus the JPY/USD (inverted axis). Is the sovereign risk trade trying to find other conduits for expressing relative risk in this environment where no sovereign risk seems to exist anymore as all countries are expected to print, print, print all their problems away.

 
Tyler Durden's picture

More Observations: VIX - Sovereign CDS Divergence





As Zero Hedge postulated a month ago, the VIX - sovereign CDS inverse correlation is becoming more and more evident. Today's action is representative: as VIX continues to slowly trickle lower, US protection is 5 wider. With the G20 pledging trillions to battle every cough and sneeze of the markets, the question becomes what does all this mean for sovereign default risk, and thus VIX, and thus equity markets.

 
Tyler Durden's picture

More Observations: VIX - Sovereign CDS Divergence





As Zero Hedge postulated a month ago, the VIX - sovereign CDS inverse correlation is becoming more and more evident. Today's action is representative: as VIX continues to slowly trickle lower, US protection is 5 wider. With the G20 pledging trillions to battle every cough and sneeze of the markets, the question becomes what does all this mean for sovereign default risk, and thus VIX, and thus equity markets.

 
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