ISDA Issues Q&A On What Happens To US CDS In Case Of A Default

Tyler Durden's picture

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buzzsaw99's picture

no way in ufck they are going to trigger an event.

digitlman's picture

I don't need to see the HTML in the article, thanks.

Ted K's picture

"True - for the likelihood of any event happening, your best bet is to ask Turbo Tax Tim, and then multiply the answer by -1."


Funny shit!!! Tyler you got good comedy writers.

SheepDog-One's picture

They will trigger an event, thats the plan after all, we just dont know WHEN.

buzzsaw99's picture

They will evict and starve granny in the street before the bondholders suffer the loss of one penny.

unununium's picture

1. Starve granny

2. Ensure bonds passed to new bagholders

3. Allow the loss of many pennies

SheepDog-One's picture

Yea, thats the plan, to 3rd world america. All your savings and retirement funds are belong to us.

RobotTrader's picture



Gold and silver selling off.  Which means a deal is being cut as we speak.

And notice how the owners of GMCR have absolutely nothing to worry about.  The stock has gone from $10 to $104 in 2 years.

When is Eric King going to interview the CEO?  LOL......

jkruffin's picture

I sold my calls on GMCR right at the open,  time to go SHORT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

A Man without Qualities's picture

Of course there will be a deal, and of course silver will sell off as a result.  However, they've exposed to the world the fact that i) the elected representatives in Washington are a bunch of lunatics and ii) the US is really fucking broke, with no way out.  Therefore, this is going to be a great buying opportunity and I for one am waiting...

Dr. Engali's picture

I hope gold and silver sell off on the news. That will give me a good entry point to add to positions.

Abitdodgie's picture

Gold and silver is selling off because the banks always raid the market for the first 2 days after options expire, to try and stop people from rolling over tomorrow we will be going north.

jkruffin's picture

Look at Europe get trashed!!!!!!!!!!!!!! And the pumpers in America think stocks are going higher today in US?  Bwaahhahaaaa!!!  Too funny!  The crooks just keep suckering morons into the scam and they keep buying it letting the terds out at higher prices than they deserve.

Quintus's picture

"... the total net exposure of market participants who have sold CDS credit protection on US sovereign debt is approximately $4.8bn as of July 15, 2011"

That's the number I've been interested in finding for the last couple of days, since this whole '3 Days Grace before ARMAGEDDON!!" meme started recently.

As I suspected, there is more net CDS exposure to Greece than the US.  I guess putting pressure on the Debt Ceiling negotiations by holding out the threat of a CDS related disaster is not going to work then.



Cognitive Dissonance's picture



The following does not constitute legal advice, and is subject in all respects to any determination that the ISDA Americas Credit Derivatives Determinations Committee may make in relation to CDS referencing the United States. 

Sounds like something the IRS tells people when they don't want to stand behind their verbal or written communications.  

"This is what we mean and we aren't responsible for what we say. Oh, and you are guilty until you prove yourself innocent. Have a nice day."

urbanelf's picture

"True - for the likelihood of any event happening, your best bet is to ask Turbo Tax Tim, and then multiply the answer by -1."

Tyler's  comments violate the inclusion-exclusion principle.


WALLST8MY8BALL's picture

I dont know if anyone has seen this yet - there was a humongous block trade in UST Futures on the CBOT yesterday

BrianOFlanagan's picture

I wouldn't be surprised if the US defaulted and was downgraded and bonds rally anyway.  Good luck to the gambler that put on that trade.

Hedgetard55's picture

Hahahaha... It was Harry Reid!

BrianOFlanagan's picture

so CDS gets triggered and the sellers have to pay based on the recovery value of the bonds - that's a big non-event.  The value of the bonds are going to be little changed as any inability to pay would be temporary.  Thus there will be little, if anything, that the CDS sellers would have to pay.

No armageddon here.


Coldfire's picture

Meme: it's containable.

Everybodys All American's picture

There will be no trigger ... if Greece did not trigger then no one will.

I said this the other day in so many words. Now a better question is what idiot would buy a credit default swap knowing it will never pay out?

zenmeister's picture

"Are CDS triggered by a declaration by a rating agency that the Reference Entity has been downgraded or is in “default”?

No. There is no link between a rating agency declaration and a CDS Credit Event. It is possible that the same set of facts might give rise to both, but it is also possible that one might occur but not the other."

...well, even if the majority does not have "downgrade" as a trigger event this is hardly without repercussions. All manner of structured notes will have rating (hair)triggers that will go off. Also, plenty of SPVs that have collateral quality stipulations of AAA rated paper are currently stuffed with USTs. When they no longer count folks will probably realise quite quickly that Bunds, OATs and Gilts are not quite as abundant. Watch out for the collateral switch stampede...

mess nonster's picture

Something tells me that "Only 4.8 billion of exposure" and "...firms’ net exposures are partially offset by the recovery value of underlying obligations", is the kind of sanguinary remark only made when one confines one's view to nothing more than the very first domino.

oogs66's picture

I think isda just copied and pasted from zh articles. Zh explained all this long ago :)

MobBarley's picture

Irrational Sloppy Default Arbitration


Greater Fool's picture

Treasury yields appear not to care one whit about the soap opera.

I think it would funny for Treasury to announce "to provide a margin of safety" that they were declaring a moratorium on interest payments...but only on notes held by the Fed.

As defined above, that is a credit event and would trigger CDS. Bond markets would likely shrug and go about their business. Protection buyers would get nothing except the privelege of losing their MtM and re-entering the trade at an equal or higher spread if they felt so inclined. 

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