CDS Prices Fell Sharply Last Week

US stock markets rose about 2.5% last week, but the biggest news came in the credit markets where default risk had its biggest weekly decline since the March equity market lows. Below is a one-year chart of a credit default swap (CDS) index that measures default risk for 125 North American investment grade entities. We also overlay a chart of the S&P 500. As shown, the CDS index fell 27% last week to a new 52-week low. Since the peak in default risk, the CDS index shown below is now down 53.38%. It is also at its lowest levels since last June. If the S&P 500 were to get back to its June '08 levels, it would need to rally more than 20% from here.

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Comments

[Tom Armistead:]

What started this whole mess was a credit shock with CDS spreads spiking upward. It would be very nice and symmetrical if this turns out to be the end of the bear market.

Sep 21 01:31 PM

[ts2:]

Can you please give a 5 year or 2 year chart?
Thanks

Sep 24 05:22 PM