Credit Default Swaps-Any Taker
CDS market has been very harsh on Indian corporate bond issuers. CDS spread is in fact the leading indicator. The big spikes came in July 07 and at the turn of 2007 (and market went turbulent 1-3 weeks after these spikes). Before the recent crash in Tata Motors stocks (from INR 645 on 28th May to INR 444 on 27th June- crash of around 31%), CDS was creeping up since 3rd week of May (see chart below).
Indian corporate bond issuers are no more regarded as very safe and the CDS on their bonds are on rise. In the last 1 year, CDS on the issued bonds have risen many folds (around 3x). Tata Motors, Reliance Com, ICICI Bank have one of the highest CDS spread in Asia (highest among Indian companies) and rightly so their prices are the hardest hit YTD 2008 among Sensex stocks.
Among Asian financial companies who have issued Senior bonds, top four CDS spreads are of Indian corporates (ICICI, SBI, EXIM and IDBI)
Among Asian telcos, RCOM has the highest CDS on its Senior bonds.
Hence, keep a watch on CDS spread of corporate bond issuers and act accordingly!!!
Indian corporate bond issuers are no more regarded as very safe and the CDS on their bonds are on rise. In the last 1 year, CDS on the issued bonds have risen many folds (around 3x). Tata Motors, Reliance Com, ICICI Bank have one of the highest CDS spread in Asia (highest among Indian companies) and rightly so their prices are the hardest hit YTD 2008 among Sensex stocks.
Among Asian financial companies who have issued Senior bonds, top four CDS spreads are of Indian corporates (ICICI, SBI, EXIM and IDBI)
Among Asian telcos, RCOM has the highest CDS on its Senior bonds.
Hence, keep a watch on CDS spread of corporate bond issuers and act accordingly!!!
posted by Vikas Maheshwari, CFA at 9:53 PM
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