If "Buy CDS" was the prior week's motto, this one's was "Do nothing, act busy, make many trips to kitchen." A paltry $6 billion in net CDS exchanged hands in a rerisking direction. The trend of CDS purchasing continues in Consumer Services, Financials and Industrials, offset by CDS sales in Utilities, Oil & Gas and Consumer Goods. Nothing notable or unique about this week.
The chart below demonstrate the net notional CDS change for total, cumulative total and key sectors since early April. Curiously, even though the equity market has continued to rise since then, the credit market has seen a net $187 billion in net CDS purchases, with essentially all sectors having seen a net increase in short risk position except financial which are a staggering outlier as a long risk cumulative data point. It would appear that a main offshoot of the squeeze in financial equity, has been a major rerisking in CDS, which, however, has not migrated to other sectors. On the other side of the chart, Consumer Goods is an almost one to one offset to the exuberance in financials, with the balance of other sectors hugging the flatline (sovereigns another notable cumulative derisk outlier).
Gross outstandings week over week were $100 billion more at $28.3 trillion, consisting of $15.2 trillion in single-names and $13.1 trillion in index and index tranches.
In the single name category, Ford was the outlier in the CDS purchased category, with another notable repeat entrant, which CDS traders had forgotten about, Berkshire Hathaway making a guest appearance in the top 10 deriskers. Other entities included several sovereigns (Hungary, Mexico, Colombia, Japan, Austria) and old faithful Bank Of America. Accounts took profits in CDS of Spain and Italy, as well as Korea, Ireland, Germany, Portugal and Argentina in the sovereign realm, and sold off Swiss Re, Capital One, UBS and Arcelor. All in all, not too exciting. Look for Porsche making a big splash in next week's top 20 deriskers.
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