Thursday, May 7, 2009

Latest DTCC CDS Update (Week Of May 1)

Last week was relatively quiet in the CDS market, shadowing the complete lack of liquidity in equities. Notable traded sectors were consumer Services and Industrials which saw a net gross notional rerisking of $32 and $39 billion, on 7,127 and 3,888 contracts respectively. Aside from these two sectors, the only other sector that saw marginal rerisking was Tech/Telecom with $11 billion in notional traded. All other sectors saw a net rerisking, for a total tally in the prior week of a rerisking of $23 billion.

Gross outstandings week over week were $200 billion higher at $27.7 trillion, consisting of $15.1 trillion in single-names and $12.6 trillion in index and index tranches.

In the single name category, IAC was at the top of the derisking category, where people couldn't find CDS fast enough, followed suit by Russia and Macy's. Interestingly, some commodities plays have emerged in the top 10 such as Rio Tinto and BHP. Other names in the top 20 such as JC Penney, Macy's and Jones indicates that credit traders are not as optimistic on retailers as their equity counterparty fanatics. In the derisking category, it seems that virtually all accounts "priced in" GM's bankruptcy and have sold a big portion of their exposure, likely afraid of being scapegoated as the entities that caused the company to file for bankruptcy. Other names notable were several of the major financials, including Citi, FSA, MBIA, DB and Wachovia.

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