News of the Bear Stearns bail-out blew out its CDS spreads to 1250bp for one year’s worth of protection, though no-one was willing to sell protection even for that price, according to data from Phoenix Partners.
That means some were offering to pay $1.25m for one year’s worth of insurance against $10m of Bear Stearns’ debt.
5-year protection initially contracted by 150bp but soon surged wider, and by 11am in New York was at about 700bp.
The wider CDX investment grade index in the US widened to around 190bp, off its record highs.
In Europe the iTraxx Europe index of investment grade credits widened out from lows of about 149 after good US data earlier, to 160bp. The Crossover index of mostly junk related debt was 1.6bp wider on the day at 625bp.
