Markit issues statement on Fannie/Freddie CDS market impact

Credit derivatives indices owner and administrator Markit has issued a statement regarding the US government rescue of Fannie Mae and Freddie Mac and its impact on CDS markets.

"The US government rescue of Fannie Mae and Freddie Mac is under a 'Conservatorship' which is classified as a bankruptcy credit event under Isda definitions," says Markit. "As a result, new versions of all Markit credit indices that have either firm as a constituent will be issued today with both entities removed."

As part of this process, Markit says it will also issue new RED codes for the new versions of the CDX NA IG indices, and for the Fannie Mae and Freddie Mac post-credit event entities. "This is to ensure a clear distinction is made between the entities before and after the credit event," says Markit.