Negative Rates Reality in Europe Accompanied By CDS Moves

A Credit Default Swaps (CDS) roll is taking place amidst a negative rates reality in Europe. After the recent announcement by the European Central Bank (ECB) of the corporate bond quantitative easing (QE) purchasing program, Bank of America Merrill Lynch (BAML) sees bond liquidity deteriorating. “This will likely push more investors in the CDS market to find liquid and scalable longs, and thus CDS indices will become the vehicle to replicate cash longs,” the report said. “This will keep the lid against significant widening should oil prices decline or the macro outlook deteriorate again.”

CDS roll noted as negative rates . . .


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