There has to be solvency issues somewhere

[athlonmank8]

AIG? They are getting hammered. Blast from the past. 2008 all over again.

AMTD ETrade getting beat up too.

 

[Sig]

Credit Default Swaps, my friend. I wish that I had more visibility into them; but, IB doesn't seem to offer pricing.

If anyone knows where I can get some charts/prices on CDSs, I'd appreciate it.

Mostly bilateral over the counter trades. Since they don't clear, you need to be a creditworthy counterparty to play. Which means more than just a FICO score over 700 in this case

 

[Same Lazy Element]

Mostly bilateral over the counter trades. Since they don't clear, you need to be a creditworthy counterparty to play. Which means more than just a FICO score over 700 in this case

Actually, index ones do and can be traced (I don't recall the exact BBG function). Single names are bilateral, but you can get indicative runs and (more importantly), for the sake of assessing the credit health of a company bond spread should be just as good.

 

[Sig]

Actually, index ones do and can be traced (I don't recall the exact BBG function). Single names are bilateral, but you can get indicative runs and (more importantly), for the sake of assessing the credit health of a company bond spread should be just as good.

Speaking of that, I never really understood why the price of a bond doesn't reflect the chance of the bond defaulting at pretty much exactly the same level of information as a CDS? I guess because the eventual bond payout is unknown where the CDS is binary?

 

[Same Lazy Element]

Speaking of that, I never really understood why the price of a bond doesn't reflect the chance of the bond defaulting at pretty much exactly the same level of information as a CDS?

It's because of the balance sheet costs and related funding issues. CDS/bond basis is a fascinating subject that has taken down several large hedge fund managers.

I guess because the eventual bond payout is unknown where the CDS is binary?

Actually, recovery assumptions are a bit easier to figure out for a bond. Single name CDS have a deliverable basket in a similar way that the bond futures do (the exact mechanics might have changed in the recent years). I recall some games surrounding CTD bonds for several defaulted issues several years ago.

PS. I have not touched credit for some years, so some of the above might be stale or outright wrong.

 

[Amun Ra]

Right now airlines, cruises, oil, casinos, and banks are getting hammered. No one is going to step foot on a ship for months. Oil companies were racking up huge debt and a few months ago just starting to look ok. With oil sub 30 they have to be bleeding. Banks are going to get creamed once this sinks in for an extended period.

There's no way some of these companies are going to survive this slowdown/quarantine.

A few hours below $30 is not going to bankrupt an oil company.

 

[athlonmank8]

A few hours below $30 is not going to bankrupt an oil company.

That's quite obvious as I stated in my post. With the burn rate of many of these companies they wouldn't last 6 months sub $35. DNR, MCEP, CHK, etc.

 

[Same Lazy Element]

A few hours below $30 is not going to bankrupt an oil company.

No, but lack of cash reserves and inability to refinance their debts would easily do it.

 

[Sig]

That's quite obvious as I stated in my post. With the burn rate of many of these companies they wouldn't last 6 months sub $35. DNR, MCEP, CHK, etc.

Keep in mind that gas prices haven't collapsed and many of these are diversified or even make more off the gas side of the operation than oil.

 

[Amun Ra]

No, but lack of cash reserves and inability to refinance their debts would easily do it.

That statement holds true for pretty much every company.