Basis trade opportunities decline as default market continues to tighten

Strong tightening in default swap premiums has eroded the basis versus cash in major sectors of telecoms, autos, media and retail, Merrill Lynch said yesterday in a research report. The default basis is the difference between the credit default swap spreads and the bond asset swap spread. The basis decreases when the CDS tighten faster than the cash.

“Investors who bought CDS protection are unwinding their trades by selling protection,” said Atish Kakodkar, a vice-president in credit derivat

To continue reading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: