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Belgium-Dexia CDS Compression Update - 110 bps In One Week

Tyler Durden's picture




 

A week ago, after we had already correctly predicted the unwind of the Dexia long CDS trade on the way up in advance of the bank's nationalization announcement, we suggested a Belgium-Dexia compression trade, now that the bank is the ward of not only Belgium but France. Quite obviously, the idea is that Dexia may well trade inside of Belgium once Belgium itself is downgraded by not only Moody's but also Fitch and S&P (look at today's blow out in Belgium CDS for an indication) imminently, while Dexia still has the implicit backing of AAA-rated (for now France). Net result: 110 bps in one week, from 452 bps last Friday to 343 bps today. We expect a pick of at least another 150 bps before unwind considerations.

Week ago - Friday October 7:

Today - Friday October 14:

 

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Fri, 10/14/2011 - 12:00 | 1773995 GeneMarchbanks
GeneMarchbanks's picture

That's a lot of clams and even more when Frenchy 'inherits' BNP. So there's that to look forward to.

Fri, 10/14/2011 - 11:59 | 1773996 THE DORK OF CORK
THE DORK OF CORK's picture

Things may be getting serious if this story is true

The decent into European Darkness begins.................

www.golemxiv.co.uk/.../foreign-riot-police-now-operating-in-greece...

 

Fri, 10/14/2011 - 12:00 | 1774007 SheepDog-One
SheepDog-One's picture

No problem! Timmah says he's found a solution to Europes bankruptcy, YOUR WALLET!

Fri, 10/14/2011 - 12:04 | 1774027 GeneMarchbanks
GeneMarchbanks's picture

They are called the European Gendarmerie Force (Eurogendfor) . They are based in Italy but funded and staffed by six signatory nations who are France, Italy, Holland, Spain, Portugal and Romania.  However, according to the Treaty which established Eurogendfor they can operate in any EU country and are available to others who invite them to do so.

Can't be true. Romania cannot fund four Gypsies to push a dead donkey off of a dirt road.

Just sayin'

Fri, 10/14/2011 - 12:07 | 1774041 Mike2756
Mike2756's picture

Doesn't the EFSF cover this, lol.

Fri, 10/14/2011 - 14:36 | 1774678 rune420
rune420's picture

Nobody expects the Romanian inquisition!

Fri, 10/14/2011 - 12:14 | 1774075 the not so migh...
the not so mighty maximiza's picture

nice info Dork

Fri, 10/14/2011 - 12:00 | 1774006 Dick Darlington
Dick Darlington's picture

The battle of the titans: Insolvent vs insolvent who's backing the insolvent. Welcome to modern finance and meet the "stability" of the deadborn political utopia called eurozone. Hahahaa!

Fri, 10/14/2011 - 12:05 | 1774033 Deadpool
Deadpool's picture

either nationalilze them all (in France banks were national less than 10 years ago) or close the CDS market. problem solved.

Fri, 10/14/2011 - 12:09 | 1774044 THE DORK OF CORK
THE DORK OF CORK's picture

When you nationalize banks you nationalize and crystalize their debts - why would you want to do that unless you own the debt paper ?

Nationalize money , not the banks - Irving Fisher.

Fri, 10/14/2011 - 12:11 | 1774058 Deadpool
Deadpool's picture

fuck it! let's forgive all debts (let the bond/deed/mortgage holders burn--like Chrysler bond holders were) and start over with the most indebted free and most poor lenders penniless.

Fri, 10/14/2011 - 12:10 | 1774051 Sudden Debt
Sudden Debt's picture

I wonder how many people still believe this won't end well...

Fri, 10/14/2011 - 12:11 | 1774056 Mike2756
Mike2756's picture

Nonsense! Look at amzn today!

Fri, 10/14/2011 - 12:17 | 1774086 GeneMarchbanks
GeneMarchbanks's picture

If you can, take a couple of days off and just study people & question them on serious financial issues. I'd feel comfortable wagering on... the majority of them.

Fri, 10/14/2011 - 12:15 | 1774078 Watson
Watson's picture

Tyler,

Since no-one else seems to have done so, may I congratulate you on a very good trade idea.

Watson

Fri, 10/14/2011 - 12:26 | 1774124 Larry Darrell
Larry Darrell's picture

Some jackass a couple of threads back commented that the Tylers caused us ZH readers to miss out on this latest stock ramp, to which I responded about this being the only trade recommendation they had made lately. 

/sarc on / Geez, we really are losing our asses.  /sarc off /

Fri, 10/14/2011 - 12:52 | 1774238 slewie the pi-rat
slewie the pi-rat's picture

yeah, nice call t.d.!

i don't follow these default swap compression trades too closely, but the underlying commentary and reasoning is +++

we're talking about transferring default risk fro TBTF (& FED fave) dexia to the countries formerly known as france and belgium, via guarantees (as w/ fannie & freddie in the US), with the deal and several billions of qatari capital coming into europeon bankstering play in a deal the 2 primeMinis shook hands over last weekend or so

happy happy joy joy

wtf could be more bullish than that, BiCheZ? 

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