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The market for credit-default swaps on Russian government debt is "dead" after investors pushed up the cost of protection to distressed levels, Pavel Pikulev, a fixed-income analyst at Trust Investment Bank, said Friday.
Pikulev said he was aware of just one $5 million Russian credit-default transaction completed at 1,100 basis points on Thursday. The risk that banks writing the contracts may not be able to meet their commitments is higher than that of Russia defaulting, he said, so the price of insurance is not accurate.
"The CDS market is now dead," Pikulev wrote in a note.
Credit-default swaps on government debt rose 78 basis points to 1,175 on Friday, according to CMA DataVision prices. The contracts climbed higher than 1,000 basis points for the first time since 2001 on Thursday after Standard & Poor's cut Russia's long-term sovereign credit rating outlook to "negative."
CDS Market on State Debt Is 'Dead'
27 October 2008
Bloomberg
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