Liquid CDSs mean cheaper debt, Fitch research finds

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Sovereign debt yields tend to rise as the liquidity of credit default swaps (CDS) on the issuer falls, and the effect is particularly strong during crises, according to a report published today by Fitch Solutions. The report compared bond yields with a CDS liquidity premium, derived from reported bid-offer spreads and variation in prices across dealers, and found a significant correlation, which strengthened during times of turmoil such as the 2008 collapse of Lehman Brothers and the European