Due to a flood at Paper Street HQ, numerous files were destroyed last week, among them the interim weekly CDS report. Unfortunately, this means we need to restart the CDS tracking from scratch this week. As there is no prior week reference just take our word for what has been happening: not a whole lot in credit land. Curious, in the last week, credit yet again was prescient of this week's equity troubles: $140 billion in net notional rerisking (CDS purchases) in the form of 5,650 contracts.
One conclusions is that the CDS market was relatively quiet in the last week, and likely even more so this week ahead of the ISDA Big Bang. It is likely that next week we will see a firestorm of CDS trades once all the protocols have been streamlined. Should get interesting for certain electric utility names once people are actually willing to trade stuff up (or down) again.
Back to the facts: gross outstandings were $28 trillion, consisting of $15.2 trillion in single-names and $$12.8 trillion in index and index tranches, $500 billion higher than 2 weeks ago.
Among sectors that saw the biggest moves, were financials, the only major area of rerisking, as well as sovereigns and state bodies (ZH is a firm adherent of the thesis that the G7 sovereign CDS index is inversely correlated with the VIX - as such this data is a good proxy, at least from a technical point of view, to anticipate how the VIX may perform this week). On the derisking side, the most prominent sectors were tech and telecom (in eerie anticipation of this week's drop in tech stocks), consumer services and consumer goods.
If there was ever an argument whether credit or stocks are more correct on average, this week's DTCC data again proved who the undisputed winner is (at least on a 1-2 week time frame).
Additionally Zero Hedge will begin presenting the top 20 single derisking and rerisking names in which there has been the most net notional action over the past week. People are not fans of Italy risk... or Brazil risk... or BofA risk... I will also highlight any particular names that, in my opinion, deserve much close scrutiny than a mere technical glance. Of particular interest: Volkswagen... very particular...
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