Fitch Solutions: Developed and Emerging Sovereign CDS Liquidity Converges

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Link to Fitch Solutions' Report: Fitch Solutions' Global CDS Liquidity Scores Commentary - Issue 62 http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656716

LONDON & NEW YORK & SINGAPORE--(BUSINESS WIRE)-- Fitch Solutions, a division of the Fitch Group, says that as of last Friday's market close average CDS liquidity for developed market sovereigns had outpaced that of emerging market sovereign debt for the first time since the beginning of this year.

"This convergence in liquidity reflects the high levels of CDS market uncertainly on prospects for the Euro zone," said Diana Allmendinger, Director, Fitch Solutions, New York.

Average developed market sovereign CDS liquidity closed last week at 8.10 versus 8.21 for emerging economies (the lower the score the higher the CDS liquidity), which compared to scores for both in the 8.6 region when these indices last converged on 21 January this year.

"This uncertainty is also reflected in CDS spreads for developed market sovereigns, which resumed widening after a brief rally in the last week of October. However, spreads for developed market sovereigns still remain inside the record high levels seen in late September," added Allmendinger.

Elsewhere, global CDS liquidity increased in the month to 11 November driven by Asia and Europe, while CDS on North American names remained largely unchanged.

The full Fitch Solutions' Global CDS liquidity scores commentary, which covers the top five most liquid CDS corporate names in Europe, North America and Asia, as well as the top five most liquid global sovereigns, is available at www.fitchratings.com under - "Fitch Solutions' Global Liquidity Scores Commentary Issue 62"

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.

Fitch Solutions, a division of the Fitch Group, focuses on the development of fixed-income products and services, bringing to market a wide range of data, analytical tools and related services. The division is also the distribution channel for Fitch Ratings content.

The Fitch Group also includes Fitch Ratings and is a majority-owned subsidiary of Fimalac, S.A. For additional information, please visit 'www.fitchsolutions.com'; 'www.fitchratings.com' and 'www.fimalac.com'.

Fitch SolutionsDiana Allmendinger, New YorkTel: +1 212 908-0848orMark Lindup, LondonTel: +44 20 3530 1028orMedia Relations:Peter Fitzpatrick, LondonTel: +44 20 3530 1103Email: [email protected]orSandro Scenga, New YorkTel: +1 212-908-0278Email: [email protected]orLeslie Tan, SingaporeTel: +65 67 96 7234Email: [email protected]

Source: Fitch Solutions

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