You are here: Home » Glossary » Positive basis trade

Positive basis trade

For single name credit trading, a trade in which the trader goes short a bond using the repo market and sells credit default swap protection on the same name. If the basis is positive - that is, the credit default swap spread is greater than the bond spread - the trader can receive income without taking on any default risk. Positive basis trades are less common than negative basis trades because the repo market for most corporate bonds is not liquid.

Related stories

Traders close out basis trades ahead of expected flood of... 4 months ago
Returns now concentrated in carry and relative value, says Barcap 1 year ago