Dealers gear up to hold Ambac credit event auction

Dealers are today set to hold a credit event auction to determine the final price of Ambac Financial Group credit default swaps. The initial bidding period is 9.45-10am New York time, with initial results at 10.30am. Limit orders must be placed by 1pm and final results are to be announced at 2pm.

Isda called Ambac Financial Group a credit event on 10 November, after the firm announced on 1 November its intention to pursue a pre-packaged bankruptcy, sending its five-year credit default swap spread wider from 69 points up front into the high 70s. Nearer-dated December 2010 and March 2011 swaps were quoted with a five-point bid/offer differential at 60/65 and 68/73 respectively, with recovery swaps at 20/24. A credit event auction on Ambac opco earlier this year settled the final price on its swaps at just 20%. 

Correlation traders have noted that the name is not widely referenced in bespoke synthetics.