Fannie, Freddie Credit-Default Swaps May Be Unwound

Discussion in 'Wall St. News' started by Daal, Sep 8, 2008.

  1. Daal


    "Thirteen ``major'' dealers of credit-default swaps agreed ``unanimously'' that the rescue constitutes a credit event triggering payment or delivery of the companies' bonds, the International Swaps and Derivatives Association said in a memo obtained by Bloomberg News today"

    this could put an end to the buying orgy of financial stocks
  2. Again, I think there must be some confusion in the media, since the agency debt is actually experiencing a spread tightening. There is not $1.47 trillion of outstanding debt on FNM and FRE corporate. I think they are referring to a CDS trigger on just the corporate, which is in the billions.

    Someone should get this right in the next few days, thus financials are not down.
  3. Daal


    uncertainty tends to be punished with selling. since nobody knows how much CDS is out there, there is the fear that some players will default.
  4. Daal


    Actually now I realize that my analysis is faulty. the sellers of the cds will just get the bond which are basically treasuries with better interest. I bet gross is counting his money now. I wish IB offered agency debt for trading with levered financing at 3.5%, or maybe they would raise margin requirements of those debts at the exact bottoms
  5. Daal


    "the seller pays the buyer the difference between the par value and the market price of a specified debt obligation, typically determined in an auction ("cash settlement")."

    this will just decrease the cds market. I don't think there will be losses
  6. vergdb


    This would decrease the cds market but not significantly