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Glencore CDS Are Soaring Again As Default Risk Rises Above 50%
The trade that has kept on giving ever since it was first presented here in March 2014 as the best way to bet on the Chinese and Commodity collapse, and which has taken place just as predicted, continues to give. As a reminder, nearly two years ago we said to buy GLEN CDS (at 180bps) on expectations of a collapse in the price of copper - the one commodity whose fate is most closely tied to that of China, and to which Glencore had the biggest exposure.
Sure enough, China suffered a hard(ish) landing, copper plunged to decade lows, and Glencore CDS exploded to levels not seen since the financial crisis, prompting management to aggressively promise it will deleverage and cut back on money-losing excess production.
The plan worked, for a few months.
As of today, with Glencore stock once again trading near all time lows sliding as low at 75p, the company's default risk just hit 54%, the highest in 6 years, as a result of its CDS blowing out past 900 and wider than the intraday spreads hit in September as the following chart from Markit shows.

Why is this important? Because recall that the collapse of Glencore was one of the catalysts for the August/September market swoon; it was never fixed but because it stopped bleeding wider, the "experts" thought it was contained. Alas, it isn't, and now the market is about to have a rude second wake up call that the world's most important commodities trader - which may be downgraded to junk any minute - is also facing an all too real probability of bankruptcy unless commodity prices somehow surge in the coming months.
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Jeezuz, would one of these fucking commodity trading companies go bust already? We all know it's coming but it's like waiting for water to boil.
The commodities frog is in the boiling pot. Cooking is slow initially.
My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.wallstreet34.com
If it that easy then it isn't work; it is called PONZE...leave shill.
Hey Croc.
Why does ZH do CDS stories? Nobody here's got the juice to trade CDS. Why the special interest? What's up?
No problem juggling chainsaws. We go this.
Dividend cuts are on their way.
The banks can take over and run their money losing mines, lots of luck with that.
Tick, tock, tick, tock, tick...
kabluuueeee.
Ancillary to this is the fact that many copper mines also recover significant amounts of silver and nominal amounts of gold. I can understand how copper has suffered through this decline but some of the pain would be offset by the increase in silver and gold values. The outright supression of PMs could be a part of putting copper mines on idle.
Just a thought.
Glencore up 4% LOL
Those CDS's may have gone up that much, but the big question is who would buy them at this point? No meat on the bone there. The best the holders can hope for is a default at this point.