ASHISH SHAH, CO-HEAD OF CREDIT STRATEGY, LEHMAN BROTHERS, NEW YORK
When firms engage in transactions that lead to succession events or refinancing debt outside of the corporate market, the uncertainty surrounding such cases can cause sharp increases in the volatility of the appropriate CDS contracts. Despite this, CDS risk premium spreads have actually decreased significantly.
The tightening is a result of technical market pressures, including an increase in issuance of synthetic CDOs. On the