CDO activity sparks tightening in default swap prices

“We are seeing a bit of a technical rally and it’s driving spreads in,” noted one trader at a leading dealing house in London. “There’s a number of CDOs being worked on and these technical factors are balancing out negative fundamentals - prices may well even go tighter.”

Traders said default prices were noticeably tighter across the board, with the cost of protection for European telecoms cheapening quickly. Five-year credit protection for BT Group debt was trading at 63/73 basis points today

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