What CDS Markets are Discounting

While equities and commodities have collapsed, alongside widening corporate credit spreads, sovereign CDS have not reacted to the coronavirus crisis as might be expected. CDS spreads have widened, but current spreads pale in comparison to the 2008 financial crisis...

Consider Sovereign Default Protection

The abrupt shift in G10 monetary policy expectations has not only triggered a substantial repricing of long-end rates, but it has also underpinned a reduction in credit risk-premiums. This is particularly evident for emerging-market sovereign issuers where the cost of...

Use Risk Rally to buy Default Protection

This post was taken from our March 5th weekly report. In line with rebounding equity markets following the 4Q18 correction, credit risk-premia have compressed sharply. This is particularly notable for the big political risk plays of 2018. UK CDS spreads have narrowed...

The Italian Doom Loop

With Rome appearing to square off with Brussels over its contentious budget, BTPs have faced considerable pressure and bank stocks have been hammered. This is the nefarious doom loop: Italian banks own a large chunk of Italian government debt and, given the lack of...

EM Credit Risk faces Repricing

Credit risk in emerging markets has long been mispriced as the impact of unprecedented monetary stimulus and record low policy rates seemingly placated concerns about higher leverage. However, with the rise in US rates claiming its first casualties (Argentina and...

Sovereign CDS Spreads Highlight Low Risk Premia

Much in the way that monetary stimulus has turbocharged equities, unprecedented low interest rates in developed and emerging markets have artificially compressed credit default swap spreads. As the charts below show, CDS spreads are anchored at the bottom end of the...