The name of the game last week was the roll, with the expiration of the June contract leading to over $300 billion in Matured Transactions. New protection creation was delayed into the roll and this week will likely see a comparable pick up in new protection purchasing. Approximately $200 billion in net notional exposure was removed from the system, however with $300 billion accounting solely to terminations, implies there was a net $100 billion purchasing offset that was not roll related.
In various sectors, the notional change was pervasive, again due to contract maturities, however sovereigns still saw a major increase in new CDS contracts, to the tune of over $31 billion.
The week saw total gross outstandings of $27.5 trillion, based on $15.3 trillion in single name CDS, a $100 billion decrease from the prior week, while index tranches finally saw a marginal increase by $300 billion to $12.2 trillion. Presumably whatever fund has been reducing its index arb position has ended its rebalancing/liquidation.
In single names, the major deriskers were some usual sovereign suspects, with Austria appearing as the 6th most active derisking name, maybe the Raiffeisen default has started to get some of the permagreen shoot smoking PMs out there to consider what happens when the musical chairs for dummies game stops and the US gov't stops p(l)aying the taxpayer music.
In rerisking, Turkey was notable for seeing over $700 billion in CDS open interest eliminated, while the bulk of other names were the expected knee jerk reaction from the prior week's major deriskers.
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