CDS report: A turn in an era? | FT Alphaville

CDS report: A turn in an era?

Events in history come in big and small packages.  Sometimes these moments come as flashpoints; sometimes they are more subtle.  Two of today’s headlines seem to be small and subtle shifts inside of a larger era in financial markets history.  First, AIG announced that it had sold a portion of its asset management unit to Pacific Century.  The move is a continuation of a larger effort to liquidate assets in order to repay government rescue funds.  The second involved an announcement from the US Treasury that it planned to sell about 7.7bn common shares of Citigroup throughout the year in a “orderly and measured fashion”.  The US Treasury originally acquired preferred shares as part of the Troubled Asset Relief Program (TARP) which it then later exchanged for these common shares.

Intraday CDS levels showed both credits trading tighter.  AIG 5Y CDS was about 20-25 bps tighter in early trading, quoting around 230-235 bps.  Citigroup 5Y CDS was 4 bps tigher at 144 bps.

While the PIIGS were wider today, they did not overly weigh on the stock or corporate credit markets today.  Greece CDS was wider due to the float of 5 bln euro worth of 7 year bonds.

There were also reports that Ireland may have to provide more support to Allied Irish Bank and Bank of Ireland.  Intraday CDS levels were at 320 bps at the time of this report vs. Friday’s close of 295 bps.

Portugal and Italy were each about 5 bps wider with Ireland and Spain each about 7-8 bps wider.

The main Markit iTraxx Europe indices were slightly tighter.  End of day fixings for Markit iTraxx Europe 5Y was at 77.67, 54 bps tighter from Friday.  Markit iTraxx Crossover closed at 426.14 vs 430.05 on Friday.

Markit’s Otis Casey wrote this CDS report