• Pivotfarm
    04/18/2014 - 12:44
    Peering in from the outside or through the looking glass at what’s going down on the other side is always a distortion of reality. We sit here in the west looking at the development, the changes and...

CDS

CDS
Tyler Durden's picture

Guest Post: Busting Out The Joint





I remember quite clearly walking home in 1990 after seeing “GoodFellas” and wondering why such obviously clever people as the gangsters portrayed in the movie would resort to crime to get ahead. Why not just apply that cunning to legitimate work, and make a legitimate living—even a legitimate profit. Now I know where all the gangsters went: They went to Wall Street.

 


Anal_yst's picture

Enlighten Me: WHY Should AIG Have Paid Swaps at < Par?





Fellow Zerohedge contributor George Washington parrots the lovely Janet Tavakoli and states his (her?) ire that the "Evil Vampire Squids" at Goldman SHOULD NOT have been paid at Par for their CDS trades with AIG.

I, for one, don't necessarily agree.

 


Reggie Middleton's picture

I've Been Warning About Wells Fargo Since Spring of '07 - The Doo Doo





No matter where the stock market rises to, no matter what accounting shenanigans are being pulled, and no matter what program traders or momentos are pushing for the moment, sooner or later (usually sooner than many realize) the fundamentals come home to roost. Enter Wells Fargo...

 


Tyler Durden's picture

Daily Credit Summary: October 22 - Now You See It, Now You Don't





Spreads were tighter in the US as all the indices improved (moving credit back just wider than Tuesday's close while stocks are just higher than Tuesday's close). Today's prices action in credit saw narrow range inside days in both IG and HY suggesting short-term underperformance (reversals from the tightening trend), and while over the last two days equity and credit are close to unch, TSYs are notably higher/steeper in yield, the dollar a lot lower and gold and oil up as the vol term structure continues to steepen up with short-dated buy-writers seemingly ruling stock risk.

 


EB's picture

Patrick Parkinson: A Case Study in How to Get Promoted at the Fed





Track the career of the man who in 1999 testified to Congress against derivatives regulation on behalf of the Fed and PPT, only to recant in 2008, then become Fed's Director of Banking Supervision.

 


Tyler Durden's picture

Daily Credit Summary: October 20 - CAT and Dogs





Spreads were broadly wider in the US as all the indices deteriorated (with IG just underperforming HY as intraday ranges remained low but sentiment was definitely more skewed to the widening side). The last week or so has seen a shift in the relative-strength between debt, equity, and vol and based on this we would expect HY-IG decompression in the short-term and equities to underperform credit here (for equity guys a sell the rally rather than buy the dips mentality in stocks short-term).

 


Tyler Durden's picture

Fitch Expects CMBS Loss Severity To Rise Markedly Next Year





As anyone who has spent even a day looking at securitization tranching or CDS trading will tell you, there are two critical components to any investment that involves risky fixed income: cumulative loss probability and loss severity: the first tells about how likely any given security is to default within a given amount of time, while the second determines what the final recovery will be assuming there is an actual even of default. The two are usually tied in very closely, as any (forced) delays in reaching a default state usually come at the expense of exhausting any underlying asset value (and in some cases being primed by additional layer of debt which get a first look on assets in the case of liquidation).

 


Reggie Middleton's picture

If a Bubble Bubble Bursts Off Balance Sheet, Will Anyone Be There to Hear It? Pt 4 - Wells Fargo





Let me know the chances of the FDIC's absorbing a behemoth such as the CDO trading, CDS writing, off balance sheet VIE having, QSPE bulging, California and Florida Zero recovery 2nd lien sporting Wells Fargo in the case some of its arcane and non-performing assets really hit the fan. I am getting ahead of myself though. Let's take this from the beginning.

 


Tyler Durden's picture

Moody's Scandal: The Firm Has Leaked Inside LBO Information





As if Moody's needed any more black marks against it, going through the Galleon indictment indicates that Raj Rajaratnam used, among many other tricks, a leak at Moody's to provide him with information on the Hilton Hotel LBO in which Galleon ended up making $4 million, and throwing a $10,000 kickback to the Moody's leaker. This is not one isolated incident: one can extrapolate that this kind of behavior was prevalent at Moody's (and probably at the other legacy rating agency) throughout the LBO boom. Just how many hedge fund managers made a killing by being stupid enough to buy stocks, or, a little smarter, to buy CDS or steepeners in the 2006-2007 period courtesy of Moody's leaks? Perhaps it is time to go through the phone records of every single Moody's analyst in that two year time period.

 


Tyler Durden's picture

Daily Credit Summary: October 15 - Upside Down





Spreads were broadly wider in the US as all the indices deteriorated (once again underperforming a relentless equity market). For the first day this year, IG4-13 all had upward sloping curves in 3s5s7s10s (notably IG8-11) as HY underperformed IG and rolls decompressed modestly. IG trades 4.3bps tight (rich) to its 50d moving average, which is a Z-Score of -0.7s.d.. At 97.5bps, IG (adjusted) has closed tighter on only 13 days so far this year (206 trading days). The last five days have seen IG diverging from its 50d moving average.

 


Reggie Middleton's picture

And the next AIG is... (Public Edition)





I have found evidence that this bank has $32 billion of naked (as in apparently unhedged) swaps on its books - just like AIG. The difference is this bank is bigger, probably has more exposure, and has already been bailed out - several times. Oh, did I mention the insured collateral is nearly half BBB rated or lower??? How about extreme management issues at the top, and I mean all the way to the top. A trunk full of junk, surrounded by drama! It should be an interesting conference call tomorrow when they report, that is if anybody decides to ask the right questions...

 


Tyler Durden's picture

Daily Credit Summary: October 13 - In Advance Of i7 Sales





Spreads were tighter in the US as all the indices improved albeit marginally as intraday ranges remained very low (but equity is still the dramatic outperformer of the last two weeks or so as IG experiences its longest period of low volatility since August of 2008). IG trades 1.5bps tight (rich) to its 50d moving average, which is a Z-Score of -0.2s.d.. At 100.5bps, IG has closed tighter on only 19 days so far this year (204 trading days). The last five days have seen IG flat to its 50d moving average.

 


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