
Liquid CDSs mean cheaper debt, Fitch research finds

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
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