Someone Tell Credit Default Swaps The US Is Out Of The Woods

Tyler Durden's picture

We noted earlier that T-Bills have merely sloshed the risk bucket from Oct/Nov to Feb and it seems CDS markets have apparently not gotten the memo. Joking aside, either CDS traders have gotten really slow or as a result of the recent fiasco US default risk has been repriced to a permanently higher baseline, some 50% higher than where it was one short month ago.


USA CDS is now +3.5bps at 39.5bps - not what one would expect given equity euphoria that it's all fixed...


and for some context...

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KenShabby's picture

When is that downgrade coming?

Manthong's picture

..better kept a secret from those evil instruments.

TeamDepends's picture

Out of the woods = going through the eye of the hurricane.  Resume nausea in 3 2 1...

Sofa King Confused's picture

< The US is out of the woods

< Collapse only postponed

Bangin7GramRocks's picture

And none of those bullshit bets/insurance/hedges will ever payout. Biggest scam ever created.

NotApplicable's picture

So... who exactly will the US have to bail out in order to make good on those CDSes again? AIG? European banking system? Both?

surf0766's picture

Europe's new sugar daddy is now China.. as per the new swap agreement

CPL's picture

There have been plenty by many agencies over five years.

A downgrade won't mean very much, it'll be when the primary T-Bill holders dump and the dollar shits the bed which in turn starts a chain reaction through all currencies in the G20 being forcably valued to anything hard, shiny and limited.  Basically the western world economy is leveled in one shot.

spastic_colon's picture

ZH have to hand it to ya for towing the rhetorical line.....but man, you must be gluttons for punishment!  rinse, repeat for Feb. (after the next taper "crisis", Syria "crisis", holiday into January ramp to ES 2000+ etc which will make a 20% correction ES 1600 and myriad "glitches").

NotApplicable's picture

Just in time for the start of Congressional Election Season.




Repeat ad infinitum.

spastic_colon's picture

another good point, if there are actually 2 parties, one is going to let the other do all of the campaigning for them by continuing to step on their own dick's, surprised they haven't figured this out yet....or not surprised.  And yet charlie brown keeps running up to kick the fucking ball...........priceless!


He needs to run up and kick Lucy.

maskone909's picture

bullish flag if i ever saw one

Cdad's picture

Nothing is fixed.  Congress had made sure of that.

insanelysane's picture

The showmen have agreed but the rest of the circus hasn't voted yet.

Hurry, hurry, step right up and see the amazing can kickers.  They can kick it 3 months, 6 months.  They can even kick it out past elections.  World's best can kickers right under this marble tent.  Watch them kick the can.


One day the can is going to get kicked so far it is going over a cliff where it won't be kicked any more.

maskone909's picture

making Janikowski look like an amateur

HoofHearted's picture

One of these days these bastards will finally kick the can into the house of cards that we have constructed. And then the financial scam, er, system, that hs been ongoing will collapse. Until then keep stacking and keep prepping.

NotApplicable's picture

Nah, the can will be conveniently booby-trapped to explode pre-kick, that way, the inability to kick can be blamed upon the obstructionist terrorists who insisted upon said trap.

Then, comes the shovel-ready jobs plan of rebuilding an entirely new can-kicking system, complete with self-kicking cans.


TheGardener's picture

Collapse we do already. And as Tyler keeps pointing out : into the new normal!

Imagine waking up in a globalized world as promised :

We would all compete freely in world wide labor markets,communist salaries would no longer matter as each according to his needs we would still need food stamps to make ends meet.

And lots and lots of government to organize all that misallocation of capital .

Jokes aside ; the new normal is just as the old normal for the formerly third world : Unstable government, unstable economy controlled by unstable currency.

Everything will stay the same, just the West will be in for some sort of a surprise.

screw face's picture

to  late suckers

Mongo's picture

Just go broke already!

LawsofPhysics's picture

Please, no CDS is going pay out, ever.  WWIII will happen first.

Dr. Engali's picture

CDS are nothing more than trading vehicles. Anybody who thinks otherwise is just deluding themselves.

NotApplicable's picture

Might as well be shooting craps.

agent default's picture

Up until now, the mention of a US default would get you funny looks from fund managers.  Now that they got the full deer in the headlights experience they will start to prepare themselves for next time.  They will start reducing exposure, they will diversify, they will look for other collateral among other things.  So next time it may be different.  They might actually start shorting quite violently instead of bracing themselves. 

Expect interest to rise soon after this debacle.  US Treasuries carry real risk from now on.

maskone909's picture

woah woah woah wait a second

you act like they are fullfilling some kind of fiduciary obligation? lol nm

agent default's picture

By law they are.

OK, I'm just trolling here.

lasvegaspersona's picture

Our whole planet needs a way to save that does not involve the promises of others to deliver value in the future. Gold at a higher price would function in this role. It is universally valued and hoarding gold does not damage other industry. The Euro (ECB)  has gold held at marked to market rates. If it wanted to it could offer to buy gold at a much higher price. For every Euro it spent to acquire gold and for every Eurpo that that caused the price of gold to rise, it's balance sheet would increase both in weight of gold possessed and in the value of gold held. This could immediately make the Euro a reserve currency but in fact it would allow gold to function as the reserve while the Euro would become simply a preferred Unit of Account and Medium of Exchange. Gold would be the universal Store of Value. No one country would have the 'exorbitant privelege'. Triffin's dilemma would be resolved.

This could happen at any time.

withglee's picture

What absolute and total nonsense.

WhiteNight123129's picture

This is the later, markets are coming to the realization that the United States like any other country can default.


TaperProof's picture

We're lost in the fucking woods during a large forest fire and wild rabid animals are all around.

Smiddywesson's picture

Thank God I didn't understand that or I'd really be worried. 

(It's important to preserve one's ignorance for when it really matters.)

Everybody shriek out loud!

Smiddywesson's picture

1.  Junk Silver:  Check

2.  Guns and Ammo:  Check

3.  Generator:  Check

4.  Food and Water:  Check

Keep prepping people, you are going to need it soon.

The Abstraction of Justice's picture

Generator is going to be noisy and attract people short on fuel. Consider getting solar panels, a solar to 12V charger, a 12V battery (boat/lorry best), and USB/AAA 12V adapters.


You also need entertainment. That depends on how many there are of you in your unit. If solo, get a lot of reading material. Even if you are not into reading, you may find it a respite when there is nothing else to do. If you have a friend/family with you, consider a good stock of board games and other group entertainment.


If your food is homogenous, such as a 100kg of white rice, consider buying a large selection of soups, spices and sauces to add a unique flavour to every meal.


Don't die of boredom.

o2sd's picture

Why is ZCTO quoted in EUR?