UK bank CDS spreads tighten on bailout news

The cost of credit protection on UK banks fell in early trading on Wednesday following the unveiling of a £50 billion recapitalisation plan by the UK government.

Eight banks – including Barclays, Lloyds TSB, HBOS and Royal Bank of Scotland (RBS) - have confirmed their participation in the plan, which will see the government make £25 billion available to eligible firms in exchange for preferences shares or permanent interest bearing shares. A further £25 billion will be available as required.

While there was significant volatility in bank share prices on Wednesday morning, the news of the government’s intervention resulted in significant tightening in

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