Dealers settle Truvo CDS at low final price

The dealer held auction today to settle credit derivative contracts referencing Truvo Subsidiary Corp has returned a very low final price of just three cents. This is, however, consistent with where bonds and CDS (around 95 points upfront) were trading at the time of the company’s default on 1 July.

14 dealers took part in today’s auction, with the first round of inside markets generating an initial market midpoint of three, which went unchanged in the subsequent placing of limit orders mainly due to a large placement by Bank of America. The lowest inside market bid was 2.125 by Morgan Stanley while HSBC entered the highest offer at 4.5. 

Physical settlement requests produced net open interest of €235.263 million to sell, with Deutsche Bank making the biggest offer at €118.975 million. Bids were in very small sizes of €1-3 million from HSBC, RBS and UBS.

Bank of America then wholly filled a limit order bid of €170 million at a price of 3.5 – derived from its inside market placement – before five other banks partially filled orders at the final price.