Wednesday, January 28, 2009

Weekly CDS Change Update Per DTCC - Technical Recommendations

New DTCC weekly change numbers released for week ended January 23. Most notable is the huge gross notional and contractual amount of full terminations of consumer services CDS. Looks like funds are fully covering overhanging shorts. As this has been the most profitable position over the past 3 months it is not too surprising. Based on this technical data, we would recommend establishing short positions in the space due to the diminishing risk of a mass squeeze. Other data indicate that aside from consumer services, risking action has been roughly equally split with derisking in basic materials, consumer goods, health care, tech/telecom, utilities, and other, and only sovereigns have seen a marked rerisking. Today's market action indicates that equities are again chasing credit.

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CreditTrader said...

Great post Tyler - your analysis fits with my book and how I interpret the same data. I have not seen much 'public' analysis of the DTCC data and wondered if you had played with any other ideas.

CreditTrader said...

BTW - I just got the joke on your blog-name (durr me!)...

Rules of the Bespoke CDO Market:
1. You don't talk about the Bespoke CDO Market.
2. You don't talk about the Bespoke CDO Market.
3. When an issuer says stop, or goes limp, even if he's just faking it, the liquidity is gone.
4. Only two parties to a trade.
5. One bankruptcy at a time.
6. They trade without reserves or stops.
7. The trades go on as long as they have to.
8. If this is your first Bespoke CDO - you have to trade!

If this is too esoteric see -

Sorry about the waffle - just made me laugh.

Tyler Durden said...

good stuff. as for ideas, many are percolating... will disseminate in due course. as for your comment #2 there is a specific underlying theme to the 8 rules here (which have not been disclosed yet). everything will be divulged in time.

CreditTrader said...

LOL...I'll be back - I trust Tyler...LOL...