The chart below is the current rate for Credit Default Swaps (Credit Derivative). It is interesting to me that these are still being traded more accurately there is still bond insurance being sold and there are some buyers. Keep in mind there is still no exchange or clearing house for these. Here is how to read this, For the B-rated bond you must pay 11% above the fed T to get insurance on the bond for a year. Of course if your bond pays 15% this is good and the Fed rate is almost 0 now. The problem is that there is maybe more risk that the company selling the insurance doesn’t pay than it is that the bond defaults.
Credit Derivative Indexes
Thursday, October 16, 2008
Credit derivatives are designed to allow sellers to take on, or buyers to reduce, the default risk on a bond.
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MID BID-ASK
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SINCE LAST ROLL
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| CDX Index | Spread (basis pts) |
Upfront | Coupon (%) |
Roll date | High | Low | Average |
| Investment grade, N. America | 197.75 | $97.89 | 1.50 | Sept. 25 | 215.43 | 128.50 | 173.74 |
| High volatility | 502.50 | 95.43 | 3.85 | Sept. 25 | 506.67 | 453.08 | 474.69 |
| High yield, N. America | 120.06 | 78.85 | 5.00 | Oct. 2 | 85.45 | 78.85 | 82.17 |
| B-rated | 1136.41 | 80.35 | 5.00 | Oct. 2 | 88.46 | 80.35 | 84.90 |
| BB-rated | 708.04 | 92.48 | 5.00 | Oct. 2 | 98.08 | 92.48 | 95.49 |
| Emerging-markets | 683.95 | 88.15 | 3.35 | Sept. 25 | 97.37 | 88.15 | 92.63 |
| Emerging markets diversified* | 527.09 | 89.05 | 2.80 | Sept. 25 | 96.60 | 87.75 | 91.84 |
Market
participants together with Markit Group Limited select companies for
each index. For additional information and a list of participants and
components, please see www.markit.com
This chart can be found at: LINK
participants together with Markit Group Limited select companies for
each index. For additional information and a list of participants and
components, please see www.markit.com
This chart can be found at: LINK