Fitch Solutions, a division of the Fitch Group, has reported that in the month to 19 August, increased credit default swap (CDS) market uncertainty on the prospects for sovereigns has pushed average global CDS liquidity to its highest level since Fitch Solutions’ liquidity scores time series began in March 2006.
“CDS referencing developed market sovereigns have seen the biggest liquidity surge, followed by emerging market sovereigns, with average CDS on both now trading at near similar levels of liquidity,” said Diana Allmendinger, director, Fitch Solutions. “This near convergence between developed and emerging market sovereign CDS liquidity was last seen during the start of this year, and appears to signal renewed CDS market uncertainty on the potential for eurozone contagion as well as slower global growth.”.
As of last Friday’s market close, average CDS liquidity for emerging and developed market sovereigns was 8.12 and 8.26 respectively, compared to 8.21 and 8.45 one month previously (the lower the score the higher the CDS liquidity). Average global CDS liquidity closed at 9.30 versus 9.34 for the same period.
In general, the liquidity of a credit derivative asset increases when it is showing signs of financial stress in combination with a significant amount of debt outstanding and/or changes in its capital structure, including new issuance. The liquidity scores of assets have historically traded between 4 at the most liquid end, through to 29 at the least liquid end. Entities also tend to be more liquid when there is agreement about present value but disagreement about future value due to heightened uncertainty surrounding the entity.
A report by broking group Marsh examines the repercussions from the administration of the South Korean company, which filed for bankruptcy protection at the end of August.
Global research by C2FO suggests that smaller businesses are less concerned with the repercussions of Brexit and the upcoming US presidential election.
A squeeze on skilled talent means it now takes an average of seven weeks to fill open permanent roles in finance in the UK according to new research from financial services recruitment firm Robert Half.
Early-stage merger and acquisition deals in Asia-Pacific show nearly 10% year-on-year growth in recent months.