CDS volumes suggest US credit riskier than Europe

NEW YORK, April 16 (Reuters) - Net volumes in credit
default swaps on the the benchmark U.S. high-grade CDS index
exceed those on its equivalent in Europe, which may reflect a
more bearish view of U.S. credit, according to a report by
Credit Derivatives Research on Thursday.
Gross volumes on U.S. and European CDS indexes are about
the same, based on data by the Depository Trust & Clearing
Corp, though net volumes in the U.S. greatly exceed those in
Europe, Tim Backshall, chief strategist at the research firm
said in a report.
This "suggests investors positioning for U.S.
underperformance in our view," he said.
Gross volumes in global CDS markets grew by only $53
billion globally last week, the DTCC said on Thursday in its
weekly report of CDS volume changes.
Changes in the way U.S. CDS are traded may have been a
factor behind the low volumes, though trading is expected to
increase in the coming weeks, Backshall said.
"We remain convinced that CDS market participants are
primed -- either long or short -- but unwilling to add/remove
risk en masse in this market; perhaps waiting for the equity
market to leg one way or another," he said.
Credit default swaps are used to insure against a borrower
defaulting on their debt or speculate on their credit quality.
When an investor buys protection they are taking a "long"
position, and when they sell protection they are taking a
"short," or negative, view of the debt.
CDS changes that reflected deteriorating perception of
credit quality during the week were on International Paper
, Whirlpool Corp , Burlington Northern Santa Fe
Corp , Germany, Porsche , Telus Corp ,
Residential Capital, United Parcel Service , HCA Inc and
Toll Brothers , said Backshall.
Positive sentiment was reflected in CDS on Italy, Ford
Motor Co , France Telecom VolksWagen ,
Sempra Energy , AB Volvo , BNP Paribas
and Ireland.
((Reporting by Karen Brettell; editing by Gary Crosse))
((karen.brettell@thomsonreuters.com; +1-646-223-6274; Reuters
Messaging: karen.brettell.reuters.com@reuters.net))
Keywords: CDS VOLUMES/DTCC

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