29.2 basis points on a 10-year treasury CDS. This is either a fantastic opportunity, or the beginning of the end. Salt to your own taste.
US 10-year Treasury CDS widens to record 29.2 bps-CMA [Reuters via Alea]
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Posted by guest , Sep 24, 2008 9:30AM
I would short that if it weren't for the Obama factor.
Posted by guest , Sep 24, 2008 9:32AM
@1 here. correction : LONG. I'd sell it.
Posted by guest , Sep 24, 2008 9:32AM
sell protection here....because if the US ever suffers a credit event, the likelihood of your counterparty coughing up the required payment is virtually nil....
Posted by Debter , Sep 24, 2008 9:33AM
that's not even 3bps, I wouldn't run for hills just yet.
"Credit default swaps on 10-year Treasury debt expanded to 29.2 basis points -- its widest ever -- from 26.5 basis points on Tuesday, according to CMA, a specialised data provider."
Posted by guest , Sep 24, 2008 9:37AM
1,2 - Can you elaborate? How could either candidate do worse than the incumbent who basically doubled the federal debt in 8 years and is bequeathing his successor with a $440 billion + deficit and likely recession?
Posted by guest , Sep 24, 2008 9:46AM
Salt? Forget it. Use Mayo as your spread!
Posted by guest , Sep 24, 2008 9:48AM
What doest his mean from a layman's perspective? I can sell an insurance policy on treasuries for 29.2 cents on the dollar?
Posted by guest , Sep 24, 2008 9:52AM
7 100 bp = 1%, so the policy would cost .292 cents (around 1/3 of a cent) per $1, not 29.2 cents.
Posted by IA , Sep 24, 2008 9:52AM
It's sort of nonsensical to even quote a level for U.S. CDS, because if the U.S. defaults, the global financial system is pretty much done anyway. It's like writing someone insurance on a massive meteor strike - who is going to be around to collect on the policy?
Posted by brokebrokerbrokest , Sep 24, 2008 9:53AM
hey # 7 -- it means <3c on the dollar
and #3 and #4 nailed it
Posted by guest , Sep 24, 2008 9:54AM
CDS aside, who is getting tired of Erin Burnett trying to burnish her credentials as a pundit on CNBC? Put her on Meet The Press once and she thinks she knows what she's talking about. Stick to trying to read the teleprompter. Same goes for Old Man River Mark Haines. God, what passes for experience and insight today is sad.
Posted by guest , Sep 24, 2008 9:55AM
10 check yr math: less than 1/3 cents, not < 3 cents
Posted by guest , Sep 24, 2008 10:06AM
@12, 10 is saying the same thing. 1/3 cent per year, but 2.92 cents for the life of the contract
Posted by guest , Sep 24, 2008 10:08AM
Correct me if I'm wrong, but @3...if you sold protection, wouldn't you be the one required to cough up payment in the event the US suffers a credit event?
Posted by guest , Sep 24, 2008 10:11AM
14 I think he's saying that a default by the US would be so apocalyptic that you probably couldn't (therefore wouldn't)pay.
Posted by guest , Sep 24, 2008 10:12AM
so who buys this stuff - I mean, really an insurance firm or whatever will be there to make good when the US Govt defaults on its debt? there is no end to the stupid bets people will make.
on another note entirely - anyone else really hate jim bunning, or was it just me thinking he was the biggest jerkoff on that committee yesterday?
Posted by guest , Sep 24, 2008 10:16AM
@5, at this point it's marginal increases in the debt I care about. 440B is sickening.
Bush and his neo-conservative ideas undoubtedly screwed us.
I don't think we need any more government spending no matter how well intentioned it may seem.
And let's drop these simplistic assertions that somehow the president and his policies has any significant effect on GDP. That's like claiming that Clinton caused the 2001 recession. We saddled ourselves with a recession. It's an inevitable part of the business cycle.
Posted by guest , Sep 24, 2008 10:19AM
@16, I suppose you could use it as part of a relative value trade against less creditworthy countries.
Posted by FUNdamental , Sep 24, 2008 10:30AM
really? Not a single spread 'em joke in the whole thread? Im disappointed in everyone.
Posted by IA , Sep 24, 2008 10:42AM
@16, Yeah, Bunning was a big douche yesterday! But he once pitched a no-hitter and also struck out 3 guys in one inning on nine pitches.
Obviously that qualifies him to draft legislation.
Posted by guest , Sep 24, 2008 10:43AM
@9
Agreed. Unless it's going to be backed by the Japanese government and paid out in Yen.
Posted by guest , Sep 24, 2008 10:49AM
@FUN you're cheeky today!
ep put it in the title.
Posted by guest , Sep 24, 2008 10:50AM
so 3bps is like saying something about the weather. It rained .001 inches of rain, but now its going to rain .005 inches. These reporters have no concept of what they are saying.
I guess instead of spreading 26 inches she is spreading 29 inches. theres your spread joke
Posted by guest , Sep 24, 2008 11:02AM
CDS prices are an absolute tail wagging the dog.They are going to go the way of portfolio insurance.
Posted by guest , Sep 24, 2008 11:22AM
@24 what's wrong with CDS? in a lot of ways, it's just a more liquid version of a regular ol' bond
5 yr interest rate swap + 5 yr corporate CDS = synthetic 5 yr corporate bond
Posted by guest , Sep 24, 2008 11:27AM
@25--same thing that's wrong with monolines.
Posted by guest , Sep 24, 2008 11:35AM
I don't get this contract at all -- why would there be any nonzero probability of the US Treasury defaulting? They'll just inflate their way out anything. Unless that's somehow built into the contract's definition of credit event.
Posted by StupidEquityGuy , Sep 24, 2008 11:43AM
What was this contract quoted for last summer? Say June or so?
~SEG
Posted by guest , Sep 24, 2008 11:45AM
By the time the U.S. defaults on its sovereign debt, I'd have long since moved to Paraguay. How do I get in on this?
Posted by guest , Sep 24, 2008 12:02PM
By the time the U.S. defaults on its sovereign debt, I'd have long since moved to Paraguay. How do I get in on this?
Posted by guest , Sep 24, 2008 12:10PM
By the time the U.S. defaults on its sovereign debt, I'd have long since moved to Paraguay. How do I get in on this?
Posted by guest , Sep 24, 2008 12:44PM
Runaway! Runaway!
pansy
Posted by guest , Sep 24, 2008 12:47PM
you're a dipshit if your answer is to buy it
Posted by guest , Sep 24, 2008 1:08PM
@28 - type bank on Bloomberg. The US Gov is #16. Looks like it was around 8 in late June according to the chart.
Posted by guest , Sep 24, 2008 1:22PM
@23, The incremental move is significant, not the nominal. 10%...I bet it would matter in a hurricane between 135 mph winds and almost 150 mph, about the difference between a category 4 and 5.
Posted by guest , Sep 24, 2008 1:27PM
Been selling it all day. Unfortunately, my Amex is maxed out and my home is under water, but I got Zimbabwe to sleeve me so I could get done with Wachovia.
Posted by guest , Sep 24, 2008 2:38PM
@27: Exactly. I don't get it either. Since all of the US government's debt is denominated in USD, they can always just print the money. Countries that have defaulted generally had debt that wasn't in their own currency so inflation wasn't an option.
Posted by guest , Sep 24, 2008 5:26PM
This makes no sense...
How could the issuer (seller) of the CDS have a better chance of remaining solvent than the government?
Posted by guest , Sep 24, 2008 5:28PM
This makes no sense at all...
How could the issuer (seller) of the US Ten Year CDS have a higher chance of remaining solvent than the U.S. government?