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Strategies & Market Trends : Value of Perfect Information

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From: Q8	11/25/2008 10:58:45 PM
	of 262

the impact that the Citigroup rescue has had in the pricing of credit default swaps (CDS) of financial institutions. Yesterday, for instance, the cost of credit default insurance at Citigroup was essentially cut in half, which is not surprising, given the nature of the agreement. The domino effect at other troubled financial institutions was notable, with CDS prices improving as follows: Goldman Sachs (GS): 68 basis points (18%) Berkshire Hathaway (BRK-A): 86 basis points (19%) Morgan Stanley (MS): 74 basis points (14%) Hartford Insurance Group (HIG): 214 basis points (10%) For those not versed in the details of credit default swap pricing, each basis point translates into $1000 per year for 5 years to insure $10 million worth of debt, so a 5 year $10 million CDS for Goldman Sachs became $68,000 cheaper in the wake of the Citigroup deal. Anyone know of any site that tracks CDS rates as we can get a heads up.. be ahead of some in the market with this type of information.. lower CDS rates, for these companies as well as others will really improve the information flow we have available to make informed trading decisions.

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