Sovereign CDS market needs to learn lessons from Greece, dealers say

An auction to settle the Greek sovereign CDS goes smoothly, but some participants argue the documentation needs to be revisited

Documentation for sovereign credit default swaps (CDSs) needs to be reviewed to incorporate lessons from the Greek debt restructuring, dealers say. Despite this, some participants argue the triggering of a credit event and subsequent auction on March 19 shows the instrument is fundamentally robust.

The final recovery rate determined by the auction was largely in line with market expectations, at 21.5%. The auction followed months of uncertainty over whether the Greek CDS contract would be