Ireland's CDS Curve Inverts

Cassandra Syndrome

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This happened to Greece just before its Treasury Curve inverted which was subsequently just before it had to call in the IMF / EU back in May.

Another corner turned.

 


Cato

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Your user name is well chosen.
 

neiphin

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i dont know what that really means

but iam vexed, so ans so"s on another tread rejoicing at the beating of students
the sooner the cliff comes the better
 

Cassandra Syndrome

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? CDS is going down and this is a bad thing?
Eh? They are all going UP, its just that the near end of the curve is soaring as is our treasury yield curve.

Its a leading chart of lights out.
 

seabhcan

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i dont know what that really means

but iam vexed, so ans so"s on another tread rejoicing at the beating of students
the sooner the cliff comes the better
CDS is insurance that someone can buy against the risk of Ireland defaulting. The price of CDS going down means (roughly) that the risk of Ireland defaulting is also thought to be going down.

This is a good thing.

EDIT: - sorry, I misread the chart. CDS prices are higher for for 2 and 3 year bonds rather than for 10 year bonds. I presume this means that traders think that these bonds are riskier than 10 year bonds - which (maybe) shows they are thinking about a default in the near future.
 

Cassandra Syndrome

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i dont know what that really means

but iam vexed, so ans so"s on another tread rejoicing at the beating of students
the sooner the cliff comes the better
It means those who are rejoicing may need to think things through logically and ponder on things such as where does the money come from that pays the wages of the thugs that beat the protesters.
 

neiphin

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CDS is insurance that someone can buy against the risk of Ireland defaulting. The price of CDS going down means (roughly) that the risk of Ireland defaulting is also thought to be going down.

This is a good thing.
so on your re-reading is it good or bad now ?
 

Cassandra Syndrome

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Is this as big a moment as you are suggesting??

Spain inverted back in the summer as have all the PIIGS before??

FT Alphaville » Another CDS curve inverts — Spain

Is this really meriting a thread or ....
And how is Spain's yield curve in comparison to ours right now? How are their debt levels? Ours over twice as large as Greece's in total and they have twice as many people.

Join the dots, inverted ones at that.
 

adrem

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And how is Spain's yield curve in comparison to ours right now? How are their debt levels? Ours over twice as large as Greece's in total and they have twice as many people.

Join the dots, inverted ones at that.
Oh don't be infantile CS !!! You positioned this post suggesting that the event of inversion was of specific note - the fact I pointed out to you was that similar inversions have occured on all of the PIIGS CDS' earlier in the year.
 

Skinner

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CDS is an indication of market opinion. It doesn't cost Ireland anything for CDS to go up and it doesn't mean that the market can see into the future.

Investers are as clueless as the rest of us - if they really knew what they were doing then CDS wouldn't have been so low for so long for US Sub-prime debt.
CDS are a way of shorting (betting against the soundness) of debt. AFAIK these instruments are traded over the counter, which means that they are unregulated and can not be accounted for, unless the CDS holders voluntarily disclose what they hold. The exact conditions of the CDS are also undisclosed, so the amount 'insured', the default trigger etc. The number of CDS taken out against a bond can be multiples of the bond too, so exactly how many CDS have been taken out against a particular bond are undisclosed.

What this means is that there may well be many CDS waiting for each bond to default, and in the event of a default defined by the CDS trigger then the CDS issuer has to 'make whole' the CDS holder.

Who are the CDS issuers?
How much exposure does each CDS issuer have right now, and to exactly which bonds?
Who are the CDS holders?

If you examine the subprime defaults in the US you will find that folk like John Paulson, George Soros etc made vast fortunes from these mortgage backed securities hitting their default triggers.

The CDS cost on short term bonds is going up, though someone is still willing to issue CDS at these prices. Lots of questions...

Any hard info Casandra?
 

droghedasouth

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The curve only means that the market sees the highest risk of default/rescheduling in 2013-2014.
 

dpbdpb

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CDS is insurance that someone can buy against the risk of Ireland defaulting. The price of CDS going down means (roughly) that the risk of Ireland defaulting is also thought to be going down.

This is a good thing.

EDIT: - sorry, I misread the chart. CDS prices are higher for for 2 and 3 year bonds rather than for 10 year bonds. I presume this means that traders think that these bonds are riskier than 10 year bonds - which (maybe) shows they are thinking about a default in the near future.
Can anyone explain why this happens? Surely if ireland defaults then this affects all bond holders to the same extent, 2 year bond holders as much as 10 year bond holders? so why is the CDS lower futher out?
 

Skinner

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Can anyone explain why this happens? Surely if ireland defaults then this affects all bond holders to the same extent, 2 year bond holders as much as 10 year bond holders? so why is the CDS lower futher out?
It means that whoever is willing to issue CDS against 10yr bonds thinks that there is less risk of default than there is of default on 2-4yr bonds.

It begs the question, exactly who is willing to issue CDS against Irish government bonds? The likelihood of default is now much higher than it was 2-3 months ago, in fact it is looking very likely.

Is the NTMA or ECB issuing these CDS?
Who is buying these things?
 

droghedasouth

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Can anyone explain why this happens? Surely if ireland defaults then this affects all bond holders to the same extent, 2 year bond holders as much as 10 year bond holders? so why is the CDS lower futher out?
Because CDS rates are per year.
Using simple interest for illustration purposes only.

1 year rate = 440
2 year rate = 530 x 2 = 1060 => 620 for year 2
3 year rate = 558 x 3 = 1674 => 614 for year 3
4 year rate = 554 x 4 = 2216 => 542 for year 4
5 year rate = 548 x 5 = 2740 => 524 for year 5
6 year rate = 542 x 6 = 3252 => 512 for year 6
7 year rate = 536 x 7 = 3752 => 500 for year 7
8 year rate = 530 x 8 = 4240 => 488 for year 8
9 year rate = 524 x 9 = 4716 => 476 for year 9
10 year rate = 518x10= 5180 => 464 for year 10
 
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hmmm

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Oh don't be infantile CS !!! You positioned this post suggesting that the event of inversion was of specific note - the fact I pointed out to you was that similar inversions have occured on all of the PIIGS CDS' earlier in the year.
This is a typical CS thread. He posts something relatively obscure to most non financial people in the opening post with a dramatic title and post attached. This gobbledygook sounds convincing and sets off a small panic amongst his fans.

When someone who knows what they're talking about asks him to explain his point, he comes back with some grandiose question about trillions of something, or global financial collapse caused by something else.

It's the weekly doom and gloom thread and it should be in a "conspiracy" section, not economics.
 

patslatt

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Markets focus when losses start

CDS is an indication of market opinion. It doesn't cost Ireland anything for CDS to go up and it doesn't mean that the market can see into the future.

Investers are as clueless as the rest of us - if they really knew what they were doing then CDS wouldn't have been so low for so long for US Sub-prime debt.
 


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