After three very volatile weeks, it seems the CDS world tapered off modestly. While action was rather subdued, the bulk of activity was focused on insurance buying, with over $63 billion in net notional being purchased in over 3,400 contracts. Total cumulative CDS action since the beginning of April grew to over $400 billion, and virtually all sectors are now net derisked over the past 2 months, with the consumer leading the risk parade.
In derisking, the biggest swing sectors were financials and consumer services, accounting for $44 and $23 billion, respectively, while sovereigns and industrials were the only reriskers at $29 and $27 billion.
The week saw total gross outstandings of $27.4 trillion, based on $15.4 trillion in single name CDS, a $100 billion increase from the prior week, and an ongoing reduction in index tranches by $600 billion to $11.9 trillion The ongoing gross notional elimination in indices versus single names is perplexing and many speculate is due to an ongoing index hedge fund deleveraging/unwind.
In single-name action, as always sovereigns were the most derisked names, with Turkey, Portugal , Germany and Russia dominating the main action. As Zero Hedge expected, euro auto action is picking up with Renault making it into the top 20 with over $100 billion in net notional action. Most notably is the 20th name - Clear Channel Communications: this is a name that could, very much like Six Flags was, be very profitable to accounts who put on a very near term flattener (3/6 months; 3/9 months).
In the reriskers Rio Tinto, Russia, CSC, Korea and Sherwin Williams dominated the action. Curiously Rio Tinto's $386 billion action was based on a mere 6 contracts changing hands. Either this is a mistake by DTCC or there is something quite fishy going on here.