Berkshire Hathaway Inc. Credit Default Swap Trading Volume Hit $594 Million Last Week, 2nd Highest Corporate Volume

| About: Berkshire Hathaway (BRK.B)

Summary

Volkswagen AG and Berkshire Hathaway Inc. were the two most heavily traded corporate reference names in the credit default swap market for the week ended April 15.

High volume doesn't necessarily indicate high risk, but it normally does mean an increasing diversity of opinion among market participants.

Trading volume in Berkshire Hathaway-related bonds was light in the US corporate bond market yesterday, and the 5-year annualized default probabilities are well under those of Volkswagen AG.

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Data released by the Depository Trust & Clearing Corporation today showed Berkshire Hathaway (BRK.A, BRK.B) trailing only Volkswagen AG (OTCPK:VLKAY) as the most heavily traded corporate reference name in the credit default swap market for the week ending April 15, 2016. American Express (NYSE:AXP), Anadarko Petroleum (NYSE:APC), Barrick Gold Corporation (NYSE:ABX), Macy's Inc. (NYSE:M), and Deutsche Bank AG (NYSE:DB) rounded out the other corporate reference names in the top 20 most heavily traded rankings.

Kamakura Risk Information Services annualized 5-year default probabilities for Volkswagen AG (in blue) and Berkshire Hathaway Inc. (in yellow) are shown in the graph below:

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As we have noted repeatedly in commentary on the credit default swap market, a high level of volume doesn't necessarily indicate a high level of default risk. Indeed, the Berkshire Hathaway 5-year default probabilities are a small fraction of the 5-year default probabilities for Volkswagen AG. High volume, but does indicate an increase in the diversity of traders' opinions on the credit quality of the firm.

In the U.S. corporate bond market, trading volume in Berkshire Hathaway-affiliated legal entities on Monday, April 18 is tabulated in this chart for the 10 issues which had at least $5 million in trading volume on the day:

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The issue with the longest credit spread history is the 2043 issue by Berkshire Hathaway Energy. If anything, credit spreads have been on a narrowing trend in recent weeks:

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Only one bond issue of Volkswagen AG has traded in the U.S. corporate bond market over the last year. The credit spreads reflect the crushing impact that the emissions scandal has had on the perceived credit risk of the firm:

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Default probabilities for both firms are updated daily, and updates are available from info@kamakuraco.com.

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