Who benefits if Ireland defaults?

seabhcan

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As I understand it, anyone who owns CDS on Irish debt stands to benefit massively if Ireland defaults. Who owns Irish CDS?

Presumably big international hedge funds own them. Goldman Sachs was calling for Ireland to be bailed out today - do they own CDS?

Do any Irish financial organisations own CDS? (and could or should the Irish Pension Reserve Fund buy CDS?)
 


dubboy

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I know everyone hates goldman, but you really cant blame them for being long CDSs AND asking for a bailout! If ireland doesnt default (i.e. gets bailed out) the CDSs are worthless, so no goldman presumably does not own them.... they do own some anglo debt tho supposedly so it's hardly an independent call. they're right tho
 

Skypeme

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As I understand it, anyone who owns CDS on Irish debt stands to benefit massively if Ireland defaults. Who owns Irish CDS?

Presumably big international hedge funds own them. Goldman Sachs was calling for Ireland to be bailed out today - do they own CDS?

Do any Irish financial organisations own CDS? (and could or should the Irish Pension Reserve Fund buy CDS?)
Quantum Soros? Tiger Management Corp.? D.E. Shaw+Co? Presumably there are also others in the frame.
 

Goodbody

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Smug bastards in the UK who say that we were never competent to run our own country.
 

selkies

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Smug bastards in the UK who say that we were never competent to run our own country.
I think they are called racists.

Particularly given the history of neglect and abuse by London when we were part of the UK.

But that might be more related to the fact that they are ignorant.
 

cyberianpan

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As I understand it, anyone who owns CDS on Irish debt stands to benefit massively if Ireland defaults. Who owns Irish CDS?

Presumably big international hedge funds own them. Goldman Sachs was calling for Ireland to be bailed out today - do they own CDS?

Do any Irish financial organisations own CDS? (and could or should the Irish Pension Reserve Fund buy CDS?)
I am not sure to what degree there is a secondary market in CDSs for Irish debt ... though CDS issuers... have been known to issue more exotic instruments to "hedge the hedge"

Is anyone aware of such for Irish debt ?

cYp
 

Goodbody

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I think they are called racists.

Particularly given the history of neglect and abuse by London when we were part of the UK.

But that might be more related to the fact that they are ignorant.
How do you respond to the fact that they seem to have been proved correct?
 

Goodbody

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I am not sure to what degree there is a secondary market in CDSs for Irish debt ... though CDS issuers... have been known to issue more exotic instruments to "hedge the hedge"

Is anyone aware of such for Irish debt ?

cYp
Typically the CDS market is independent of the market in debt. This creates the possibility of a much larger CDS market than the market in the underlying debt. Like 100 people all having a separate life assurance policy on someone who they are not related to, or even know.
 

cyberianpan

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Typically the CDS market is independent of the market in debt. This creates the possibility of a much larger CDS market than the market in the underlying debt. Like 100 people all having a separate life assurance policy on someone who they are not related to, or even know.
My question is around the size of the secondary market in Irish Gov debt CDS (which may be facilitated by more exotic instruments) ... this type of market is famously opaque... and with hedges being written on hedges on hedges .... may be intractable.

cYp
 

Skypeme

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Do you have any evidence of this or are you just name-dropping?
My use of the question mark would indicate that I do not, but those named could constitute a list of possibles, unless of course you can rule them out.
 

blodger

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As I understand it, anyone who owns CDS on Irish debt stands to benefit massively if Ireland defaults. Who owns Irish CDS?

Presumably big international hedge funds own them. Goldman Sachs was calling for Ireland to be bailed out today - do they own CDS?

Do any Irish financial organisations own CDS? (and could or should the Irish Pension Reserve Fund buy CDS?)
A CDS at its simplest is simply insurance against default. Such hedges are used for 2 reasons: (i) speculation - you can gain big if you do not hold the covered bond and if there is a default as you recieve a big payout. (ii) portfolio management - any responsibly managed pension fund or investment fund that has invested in irish bonds should hold a CDS as protection. You could argue that they sell the bonds but sometimes they can't as it is against the terms of reference of the fund and also forces crystallisation of losses.
 

StopTheRot

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Does anyone know where that clown on Bloomberg yesterday got his info when he stated we had 60 days of funds left? Seems to me this guy probably had us shorted & just wanted to guarantee a profitable return for himself its disgraceful that a guy like this gets air time to do his dirty dealing these guys are playing with a whole nations sovereignty & if this is the case maybe I’m completely off the mark here but why wasn’t anyone from the government demanding that this guy explain himself or where he got his info from they need to start exposing these guys for the sharks they are before the vested interested destroy us.... or maybe his info is correct!
 

eoghanacht

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How do you respond to the fact that they seem to have been proved correct?
We may be down but we are far from out.

We can use this debachle as a valuable lesson. We have yet to mature and we are going to develope into a healthy Democracy as they all did.
 

nuj

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I am not sure to what degree there is a secondary market in CDSs for Irish debt ... though CDS issuers... have been known to issue more exotic instruments to "hedge the hedge"

Is anyone aware of such for Irish debt ?

cYp
Try DTCC » Consent for a guide on outstanding (known) CDS positions. DTCC is a clearing house for CDS, but the positions it records aren't necessarily the whole picture, or any known percentage of it, either. It records both gross and net positions. Rather than there being a secondary market in CDS, participants usually square their positions by entering a new counterbalancing contract, hence the gross numbers way exceed the net.

For the week ended 5/11, the following positions are recorded on the site:
Net contracts $m
AIB 761
Anglo 388
Ireland 4539
ILP 334
BoI 670
Total 6692

Greece 7149
Portugal 7770

With near €90bn of direct state bond borrowing, the CDS total for Ireland is around 5% of the total. I don't have the numbers for bank borrowings which the CDS above would cover.

Nice as it would be to believe that our woes could be solved by squeezing evil speculators, the numbers don't stack up. I'm sure there are quite a few ESs in there, but there's equally likely to be genuine insurance buyers on Irish positions.

The numbers quoted for Greece and Portugal are for the sovereign entities.

EDIT: I made a stupid mistake above. CDS contracts on euro entities are quoted in US$. The € value is about €3.3bn, and as a percentage of Irish debt is around 4%.
 
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cyberianpan

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Try DTCC » Consent for a guide on outstanding (known) CDS positions. DTCC is a clearing house for CDS, but the positions it records aren't necessarily the whole picture, or any known percentage of it, either. It records both gross and net positions. Rather than there being a secondary market in CDS, participants usually square their positions by entering a new counterbalancing contract, hence the gross numbers way exceed the net.....

With near €90bn of direct state bond borrowing, the CDS total for Ireland is around 5% of the total. I don't have the numbers for bank borrowings which the CDS above would cover.

.
The nett total is indeed low ... but... is the DTCC the only clearing house ? My understanding from the time of the CDS on CDO problem was that the stuff wasn't being settled anywhere in a transparent manner... and with some banks creating exotic/bespoke instruments being hedges on hedges on hedges ... the situation was hopelessly unclear... indeed to this day there is massive disputation over what GS's true nett position with AIG was. Though perhaps the CDS market in sovereign debt is more sedate and vanilla...

cYp
 

Skinner

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The CDS holders will be the real killing on the defaults.
Been asking this same question for months now, though I'd assume the usual suspects:
Goldmans, Paulson, Soros etc

And, who exactly issued the CDS?
Because it is the issuers who will have to pay out.
Who are the issuers?
 


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