Barclays Capital analysts point out in their most recent European Credit Alpha report that Greek government bonds have been trading substantially wider than credit default swaps on the sovereign. This creates large potential returns on negative basis packages, especially if there is a credit event in the near term.
The negative basis between five-year bonds and five-year credit default swaps has recently been as great as 200 basis points. However, the basis can be even greater for a basis packaging combining short-dated credit default swaps and long dated bonds, says the report. The old-style restructuring used in Greek sovereign credit default swaps means that obligations of any maturity up to 30 years out can be delivered into any credit default swap.
Already a registered user? Click here to login.
Already a subscriber? Not logged in? Click here.
If you currently have a free trial, you will see
this message when you try to view articles
older than 30 days.
Click here to subscribe and receive
access to our extensive archive.
Bookmarking this article will save it in your membership area for your reference at a later date. You can bookmark as many articles as you like.
To access your membership area click here or on 'Manage My Account' located in the top right hand corner of any page. You must be logged into the site to use this feature.
For help, please contact us on
+44(0) 20 7253 9510.