The rising number of names in the CDS market trading at very high spreads has driven trading volumes in recovery swaps, with over 100 trades in the past two months, says Marcus Schüler, Deutsche Bank’s London-based head of structured credit marketing.
Before last Saturday’s credit event, Deutsche Bank reported a trade going through on a Delphi recovery swap at 58%/60%. Meanwhile, Markit, the London-based data and risk management specialist, saw Delphi’s mid-market five-year CDS level finishing Friday trading at 19.89% upfront, a 613 basis point widening over the previous 28 days.
The focus has since shifted to the ailing Detroit-based auto maker General Motors. Deutsche Bank quoted GM CDS at 985/1005bp today – a rise of 70bp over Tuesday’s close – and reported a trade on the GM recovery swap at 40%/45%.