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Posts tagged ‘Credit default swap’


BY  Jim_Willie_CB

Notice the debt  solution to the debt problem handed to Greece, shoved down their throats.  More specifically, observe the austerity budget requirements that assure  economic deterioration. No exception has been offered, yet the same  prescription is applied that results in job cuts, project termination, and  greater deficits. Observe the bond swaps of new faulty bonds for old impaired  ruined bonds. No solution there. Observe the strongarm methods of powerful  coercion to enable the bond holders a cooperative role in the process. Observe  the asset grabs and seizures tied to collateral in previous debt agreements.  Observe the vacuum effect of money fleeing the Greek banking system. Observe  the profound economic recession, far worse than reported. Observe the chaos in  the streets, as the people are angry that decisions are made without their  participation, acknowledgement, or approval. As the Greek debt default  continues down the road, with delays and distortions to its view, the only  assurance is the end point. The banks resist a liquidation or exit from the  Euro currency, since it would spell sudden death failure for many large  European banks. The nation must exit the Euro currency in order to write down  its debt more effectively (rather than trade it), in order to be in a position  to devalue it for a true stimulus, in order for a fresh start out from under  the banker thumb. Let’s watch the details of the Credit Default Swap, whether a  default event is ordered. Be sure to know that the claimed $3.2 billion in net  CDS payouts is a grand lie. If $200 billion is offset by $196.8 billion between  Group A versus Group B (guessed hypothetical numbers), then know clearly that  Group A is deader than dead, while Group B will never by paid by the dead  counter-party. The CDS sham reveals mutually dead financial entities, not  offsetting calculus.

full article at source: http://www.marketoracle.co.uk/Article33529.html



I cannot for the life of me understand how the loss to somebody of 100, Billion Euros on an investment can be categorised as a success. Clearly somebody must pay for this loss and I suppose it’s going to be the taxpayers of Germany but this is not the end of this crises .I see Greece polishing its begging bowel for the next round of free money. Meanwhile the Irish are been the teacher’s pet and are paying off the bad investments of Deutsche Bank and what do we get for it another kick in the googlies as we are handed another list of austerity measures !

Wake up Ireland!



what is a credit default swap ?and why we should be trembling right now!

Allow me to teach you what a credit default swap is and why it’s so important to what is happening to the economy today.

Virgle Kent borrows $50 from me. I want to get insurance on his debt in case he goes broke. I go to Roissy and say, “Hey, Virgle Kent owes me $50. Can you insure that debt?”

“I’ll insure it if you pay me $4 a year,” Roissy says.


Roissy is betting that VK will pay me back, especially since he did his homework by looking at VK’s credit rating and saw it was superb. Roissy wrote me a credit default swap, an unregulated derivative invented in 1995 by JP Morgan.

Unfortunately Roissy has some problems with his business, and he no longer even has $50 to pay me in case VK goes broke. The premiums I gave him are long gone. Credit agencies notice this and tell Roissy to find some cash or his credit rating goes down. Roissy is fucked because if his credit rating goes down then he won’t be able to raise cash at good rates to keep his business open (today’s large businesses need a constant flow of credit to maintain operations). Sure enough his rating gets killed and Roissy goes bankrupt.

Now I’m in trouble. The debt I had on my books that was insured is now uninsured. The agencies look at my books and see I have this exposed debt and they downgrade my ass. I have no choice but to enter bankruptcy as well. But I happened to be knee deep in the CDS game too. I wrote a ton of them for Arjewtino, insuring the debt owed to him by other parties. When I go down it puts pressure on him. Like dominoes we fall.

In the carnage it turned out that the ratings we used to judge each other’s debt worthiness was bogus from the start. Essentially we all gambled like we would at a blackjack table, but we did it while drunk. And blind.

The insurance company AIG wrote $78 billion worth of swaps.

Ivy League MBA’s turned the CDS into an even more insidious device. In ways that I will not begin to understand, swaps were used not just to insure against debt but to speculate if companies would fail or not. It turned out that while VK only owed me $50, there were swaps written worth $500 between parties that VK didn’t even know about! The swaps became a means to make money instead of a simple insurance policy. This was enabled by a government run by politicians whose treasure chests were stocked full of kind donations from the big bankers. They did not hesitate to look the other way.

A lot of swaps were written by banks and businesses that are now very sick from making bad bets and possibly outright fraud in the housing boom. (Who would have thought that giving no money down / no-doc loans was a bad idea?)

Here’s the bad news:

…there are $45 trillion of credit default swaps out there. A default on a mere 10% would cause an economic disaster. Unfortunately, it’s guaranteed to happen.

Actually that was the good news. Here’s the real bad news:

The Bank for International Settlements recently reported that total derivatives trades exceeded one quadrillion dollars – that’s 1,000 trillion dollars. How is that figure even possible? The gross domestic product of all the countries in the world is only about 60 trillion dollars. The answer is that gamblers can bet as much as they want.

The quote up top was said by Henry Paulson


The Total Amount of Credit Derivatives Outstanding is $14.9 trillion.

By Andrew Mann

I have been extremely interested in the global derivatives market ever since I
saw the documentary “Collapse.” I am not going to bore you with the details of
this documentary, but to summarize, the documentary focuses on the unsustainable
global dependence on oil supply (which is decreasing), and the unsustainable
nature of our current capitalistic society (topic for another day). In this
documentary the main character/pundit/whistleblower, Michael Ruppert, states
that the world derivatives market is in excess of $700 trillion. Needless to say
I was blown away by this amount, and I vowed to do some research and figure out
how there can be an active financial market 50 times that of the United States
Gross Domestic Product. I am not going to attempt to delve into the global
derivatives market as a whole. Instead, I will focus on the derivatives that are
written by U.S. commercial banks.

please read this full article at source :



When you read this you become aware of the utter hopelessness of the financial debts crises in the entire world. For years I have been trying to highlight the derivative activities of the Irish banks and their hidden massive losses .These losses are still been hidden in the IFSC one of the worlds biggest hot money safe havens .this is where despot dictators, drug barons and their likes have their ill-gotten billions “managed” by so called fund and asset management companies who give a venire of respectability to what is in fact money
laundering on a massive scale. Just take a stroll along the river Liffy and you
can see the glass palaces these blood drenched money launderers work in .


Credit default swaps and treason in Greece

The revelations of Credit default swaps and treason in
Greece should start to flash red lights here in Ireland as there are enormous
movement in Irish credit default swaps spreads. With well placed insiders are
able to make huge money and nobody is calling for a public enquire, these financial
instruments of mass destruction are been used and nobody knows who’s benefiting
from them!

Are we not going down the obvious road to default because of
a conflict of interest by those that are charged with this decision??? How do
we know that special interests are not been looked after???

Can we thrust our politicians? I know what my answer is !

AIB has already defaulted see here

The International Swaps and Derivatives Association (ISDA) yesterday said that   a “credit event” had occurred on Allied debt, meaning the bank has   effectively defaulted on its debt, a situation the Irish government has gone   to extreme lengths to avoid.

Credit default swaps (CDS) sold on Allied subordinated bonds and, crucially,   its senior debt, have been activated by the decision of the ISDA   determinations committee that decides whether a borrower has defaulted.

The decision by the committee, which is made up of 10 major banks, follows the   announcement earlier this month by the Irish High Court of a “subordinated   liabilities order” that changed the terms under which junior debt in   Allied was originally sold, forcing holders of the bonds to accept an   extension in the maturity of the debt to 2035.

Allied had already missed a coupon payment on its Lower Tier 2 debt. However,   changes in the law enabled the bank to avoid being forced to be formally   placed in default.

For the market, ISDA’s decision renders this move largely irrelevant as it   means the bank will be categorised as in default in the eyes of investors.(source http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8590428/Allied-   Irish-Bank-has-defaulted-says-derivatives-body.html  )

Irish Credit-default swaps surge

Ireland Says They Want To Go Back To The Bond Market As 10-Year Yield Surges Past 9%

The National Treasury Management Agency has today said it will resume borrowing on the state’s behalf from international money markets as soon as conditions allow, saying Ireland may not necessarily have to draw down the bailout funds provided.

NTMA chief executive John Corrigan this morning said the agency was still monitoring market conditions, and that it would move to issue new Irish bonds – which the current bailout funds are being provided in substitute for – whenever conditions were better than the fixed rates offered by the EU and IMF.

The terms of the agreement reached with those two bodies, Corrigan said, did not “preclude the NTMA from seeking to fund in the markets itself”, the Wall Street Journal quotes.

“It was important from a debt management perspective to avoid a situation whereby Ireland would be faced with a “funding wall” upon the conclusion of the programme,” Corrigan said in the NTMA’s end-of-year statement.

The €67.5bn worth of 7.5-year loans being provided by Brussels and Washington are being offered at an average rate of 5.83%; at present, second-hand Irish bonds maturing in eight years’ time are trading at 8.625% this afternoon.

Ireland was forced to negotiate funding deals with the EU and IMF after the market costs for Irish borrowing spiralled beyond levels considered sustainable by the Irish state in September; the NTMA cancelled scheduled auctions for October and November, citing that the high interest rates were beyond what Ireland was willing to pay.

This afternoon, the interest rate being demanded by the markets for Irish 10-year loans – considered the benchmark measure among investors of a country’s ability to meet its obligations – continued to rise above 9%, a level around which it has hovered since before Christmas.

Elsewhere in the NTMA’s end-of-year report, the agency said the cost of paying interest to service Ireland’s national debt – which stood at €93.4bn at the start of the year – had risen to €4.8bn last year, the equivalent of over 15% of Ireland’s tax take for the year when compared to exchequer returns released on Wednesday.

That bill for serving Ireland’s borrowings was, however, €320m below the amount budgeted for.

Fine Gael finance spokesman Michael Noonan described the €4.8bn interest bill as the “toxic legacy of 13 years of Fianna Fáil government”.

Read more: http://www.businessinsider.com/ireland-bond-market-9-percent-2011-1#ixzz1AZROSd6f 


Without coming clean and stop telling lies and a clean out of the current personal in the Department of Finance, NTMA and NAMA they have no chance and the market will let them know soon enough and they did see below.



By Abigail Moses

Jan. 10 (Bloomberg) — Portugal and Ireland led a surge in the cost of insuring against default on European sovereign debt to record levels on concern government funding costs are becoming unsustainable.

Credit-default swaps on Portugal jumped 11 basis points to a peak of 549, according to CMA. Ireland soared 26.5 basis points to an all-time high 682 and Belgium was 7 higher at a 255. That helped push the Markit iTraxx SovX Western Europe to a record 223 basis points.

Investors are bracing for debt sales this week from Portugal, Spain and Italy. Portuguese bonds fell today amid mounting speculation the nation will have to tap the European Union’s 750 billion-euro ($966 billion) rescue facility if its yields remain above 7 percent.

“As yields rise, markets will get more concerned Portugal will have to tap EU/IMF funding,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London. “The positive for Portugal is that it’s not locked out of the market yet. It can access funding, but at a cost.”

Credit-default swaps on Spain increased 4.5 basis points to 361.5, approaching the Nov. 30 record of 364, and Italy climbed 2 to 255, close to the 268.5 basis-point peak, according to CMA. Greece was up 14 basis points at 1,060.

Sovereign concerns also undermined confidence in the region’s banks, with the cost of insuring financial company bonds at the highest levels in almost two years.

Financial Swaps

The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers rose as much as 6 basis points to 210, matching the March 12, 2009 record closing price, according to JPMorgan Chase & Co. The gauge was trading at 206 at 10:30 a.m. in London.

Markit Group Ltd.’s subordinated index jumped as much as 12 basis points to 375, before trading at 366.5. Swaps on the senior debt of Commerzbank AG surged 36 basis points to a record 277, according to CMA. That’s up from 142.5 basis points Jan. 4.

The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 12.5 basis points to 451. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 2.5 basis points to 114.25, JPMorgan prices show.

Swaps on BP Plc jumped to a more than five-week high after a leak two days ago at its Trans-Alaska Pipeline System that carries 15 percent of U.S. crude output. Contracts on BP rose 11 basis points to 98, according to CMA.

A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year. Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. An increase signals deterioration in perceptions of credit quality.

–Editors: Michael Shanahan, Paul Armstrong

To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


This only goes to show that the Markets do not believe a word the Irish Finance Minster says and they just don’t trust him or any of his cronies in the NTMA or NAMA .Despite the denials coming from the Banks and NAMA the huge losses in their Derivative positions will have to be publicly acknowledged sooner or later! We might then get a clearer picture of the scale of the problem, we the taxpayers are expected to solve and the inevitable default on the private debts of the corrupt banks will be the obvious outcome .How many times must I repeat myself ? You cannot fool the Markets Mr.Lenihan!


Western Europe CDS on sovereign debt is now higher than Eastern Europe Sovereign debt.

There is only one short I want to put on in this market.  It is to short the EU Bureaucrats in Belgium.  They are toxic to the continent.

They are going out of their way to blow up the “old world”.  You only have to look at the CDS spreads on CDS indexes that track Western Europe fear risks vs Eastern Europe, to see just how spectacular they have been of late.

Western Europe CDS on sovereign debt is now higher than Eastern Europe Sovereign debt.  Can we say reality is going to suck soon in the Sovereign debt issuing pits?

You can expect rates to increase from here, now that the EU released its White paper on how to give bank bond holders a haircut.  The brilliance in this move will show up in Sovereign spreads blowing out worse, all across the Western Front.

Let’s just do a little mental math here.  The majority of the trading that is the liquidity in question is generated by European traders.  So by default, we have a group of western traders looking around and shorting the shit out of their own bonds via CDS trades.

They are not a bunch of dummies normally.  So why is it that in aggregate they suddenly hate their own sovereign bonds more than their bankrupt cousins?  This reminds me of prop desks in NYC shorting IB banks across the street, only because they could pull off a good synthetic short on themselves.

The implications are clear, the boys on the other side of the pond realize the gig is up.  The giant debt roll of Europe is going to be impossible.  They are positioning to risk management, to cover as much of their own holdings as they can. You only have to look to the leadership of Europe to see why.  So we have some traders who know the lay of the land, better than anyone else shorting each other.

So how do we join them in this short? How do we short the EU Bureaucrats?

What is the best way to play the Europe scare that is obviously coming to the debt markets in Europe?  Is there a liquid short available?

Read more: http://www.businessinsider.com/shorting-european-bureaucrats-2011-1#ixzz1AZLnJo2p

This is all about Irish Banks Too

  except the poor that can’t pay their TV License

Sellers of Anglo defaults may pay 25.5c on euro

Sellers of default insurance on Anglo Irish Bank may have to pay as much as 25.5 cents on the euro to settle contracts linked to senior debt.

Credit-default swaps traders set final recovery values in auctions yesterday of 74.5 per cent and 76 per cent on the senior bonds, according to Markit Group and Creditex Group. Results varied because of the different maturities of notes being auctioned.

Final values for subordinated debt were set at 18 per cent and 18.5 per cent.

Anglo Irish changed terms on 2017 subordinated bonds, virtually wiping out investors who did not accept an 80 per cent discount on their notes.

Investors can choose not to settle contracts, betting they will get more if losses are imposed on remaining junior notes maturing in 2014 and 2016. – (Bloomberg)

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