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Cds Prices/points

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Being a numpty, I found this article extremely interesting. I was on verge of putting some funds into Kaupthing, dont think I will bother. Perhaps someone with more knowledge than me, can comment

http://www.thisismoney.co.uk/investing-and...mp;in_page_id=3

Is your bank about to go bust? Before anyone gets too panicked by this aggressive opening gambit, I should say that despite Northern Rock and now Bear Stearns in the US, the likelihood of any High Street bank going bust is slim indeed.

WANT TO KNOW MORE?Could Kaupthing Edge be the next Rock?

Just how safe are overseas banks?

OTHER STORIESBanking crisis fears after Stearns collapse

Market report: Monday close

Sunday newspaper share tips

Bank urged to cut rates as gloom deepens

JP Morgan star Dimon rises to a risky rescue

FTSE LATEST5414.40-217.30

BUDGET 2008 So how has the Budget 2008 impacted on your personal finances?

>> Budget 2008

LATEST SHARE TIPS > Newspaper tips

> Daily Mail tips

> Small cap tips

> Midas share tips

>> ALL SHARE TIPS

MARKET DATALive share prices, world

indices, and much more: Please select... FTSE 100 index UK and world indices Share prices Top movers New issues Popular shares Charting tools Heatmaps

But not impossible. And as with everything that is theoretically possible, the markets have a way to put a price on that risk and that is the price of a credit default swap.

CDSs are quite simple. They are contracts that allow someone who owns bonds issued by a company to insure themselves against it defaulting. The price of CDSs is measured in percentage points and is essentially a price for insuring debt.

For example, CDSs on Lloyds TSB are priced at about 1.33%, or 133 basis points. That means anyone with £10m of Lloyds TSB bonds could insure against it defaulting for £133,000 a year. These prices move constantly because there is a market in CDS contracts, so watching the figures gives an idea of just how risky the market thinks a bank or any other company is. The higher the figure, the higher the risk.

Lloyds TSB has low exposure to US mortgage market toxicity and its 133-point figure is one of the lowest among banks. Most are in the same ballpark. Barclays, for example, is at about 170 basis points and HSBC 145.

To get a sense of what is a bad figure, let us take Bear Stearns, the bank that needed an emergency bailout last week. In the days and hours before the crisis hit Bear Stearns, its CDS price hit 720 points. The message being sent out by the credit markets was clear - the bank's debt is very high risk.

So what are the other interesting figures? In the UK it is worth noting HBoS. Its CDS price was about 235 points last week, a long way from seriously worrying but markedly higher than most other British banks. This reflects its high mortgage exposure in the UK, its relatively high exposure to certain types of near-prime mortgages in the US and its slightly higher dependence on financial markets to fund lending.

More risky is Alliance & Leicester, whose price was about 342 points last week, again reflecting its high dependence on wholesale financial markets, which have become frozen in recent months. But the real horrors are in Iceland.

Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.

Of course, no one can be sure that disaster looms for anyone, but the figures on credit default swaps show clearly where investment professionals think the big risks are.

You have been warned.

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Being a numpty, I found this article extremely interesting. I was on verge of putting some funds into Kaupthing, dont think I will bother. Perhaps someone with more knowledge than me, can comment

http://www.thisismoney.co.uk/investing-and...mp;in_page_id=3

Is your bank about to go bust? Before anyone gets too panicked by this aggressive opening gambit, I should say that despite Northern Rock and now Bear Stearns in the US, the likelihood of any High Street bank going bust is slim indeed.

WANT TO KNOW MORE?Could Kaupthing Edge be the next Rock?

Just how safe are overseas banks?

OTHER STORIESBanking crisis fears after Stearns collapse

Market report: Monday close

Sunday newspaper share tips

Bank urged to cut rates as gloom deepens

JP Morgan star Dimon rises to a risky rescue

FTSE LATEST5414.40-217.30

BUDGET 2008 So how has the Budget 2008 impacted on your personal finances?

>> Budget 2008

LATEST SHARE TIPS > Newspaper tips

> Daily Mail tips

> Small cap tips

> Midas share tips

>> ALL SHARE TIPS

MARKET DATALive share prices, world

indices, and much more: Please select... FTSE 100 index UK and world indices Share prices Top movers New issues Popular shares Charting tools Heatmaps

But not impossible. And as with everything that is theoretically possible, the markets have a way to put a price on that risk and that is the price of a credit default swap.

CDSs are quite simple. They are contracts that allow someone who owns bonds issued by a company to insure themselves against it defaulting. The price of CDSs is measured in percentage points and is essentially a price for insuring debt.

For example, CDSs on Lloyds TSB are priced at about 1.33%, or 133 basis points. That means anyone with £10m of Lloyds TSB bonds could insure against it defaulting for £133,000 a year. These prices move constantly because there is a market in CDS contracts, so watching the figures gives an idea of just how risky the market thinks a bank or any other company is. The higher the figure, the higher the risk.

Lloyds TSB has low exposure to US mortgage market toxicity and its 133-point figure is one of the lowest among banks. Most are in the same ballpark. Barclays, for example, is at about 170 basis points and HSBC 145.

To get a sense of what is a bad figure, let us take Bear Stearns, the bank that needed an emergency bailout last week. In the days and hours before the crisis hit Bear Stearns, its CDS price hit 720 points. The message being sent out by the credit markets was clear - the bank's debt is very high risk.

So what are the other interesting figures? In the UK it is worth noting HBoS. Its CDS price was about 235 points last week, a long way from seriously worrying but markedly higher than most other British banks. This reflects its high mortgage exposure in the UK, its relatively high exposure to certain types of near-prime mortgages in the US and its slightly higher dependence on financial markets to fund lending.

More risky is Alliance & Leicester, whose price was about 342 points last week, again reflecting its high dependence on wholesale financial markets, which have become frozen in recent months. But the real horrors are in Iceland.

Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.

Of course, no one can be sure that disaster looms for anyone, but the figures on credit default swaps show clearly where investment professionals think the big risks are.

You have been warned.

I remember reading here a while ago that the Icelandic banks were paying a hefty margin above LIBOR due to their extra risk... I wonder what premium they are paying now?

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Being a numpty, I found this article extremely interesting. I was on verge of putting some funds into Kaupthing, dont think I will bother. Perhaps someone with more knowledge than me, can comment

http://www.thisismoney.co.uk/investing-and...mp;in_page_id=3

Is your bank about to go bust? Before anyone gets too panicked by this aggressive opening gambit, I should say that despite Northern Rock and now Bear Stearns in the US, the likelihood of any High Street bank going bust is slim indeed.

WANT TO KNOW MORE?Could Kaupthing Edge be the next Rock?

Just how safe are overseas banks?

OTHER STORIESBanking crisis fears after Stearns collapse

Market report: Monday close

Sunday newspaper share tips

Bank urged to cut rates as gloom deepens

JP Morgan star Dimon rises to a risky rescue

FTSE LATEST5414.40-217.30

BUDGET 2008 So how has the Budget 2008 impacted on your personal finances?

>> Budget 2008

LATEST SHARE TIPS > Newspaper tips

> Daily Mail tips

> Small cap tips

> Midas share tips

>> ALL SHARE TIPS

MARKET DATALive share prices, world

indices, and much more: Please select... FTSE 100 index UK and world indices Share prices Top movers New issues Popular shares Charting tools Heatmaps

But not impossible. And as with everything that is theoretically possible, the markets have a way to put a price on that risk and that is the price of a credit default swap.

CDSs are quite simple. They are contracts that allow someone who owns bonds issued by a company to insure themselves against it defaulting. The price of CDSs is measured in percentage points and is essentially a price for insuring debt.

For example, CDSs on Lloyds TSB are priced at about 1.33%, or 133 basis points. That means anyone with £10m of Lloyds TSB bonds could insure against it defaulting for £133,000 a year. These prices move constantly because there is a market in CDS contracts, so watching the figures gives an idea of just how risky the market thinks a bank or any other company is. The higher the figure, the higher the risk.

Lloyds TSB has low exposure to US mortgage market toxicity and its 133-point figure is one of the lowest among banks. Most are in the same ballpark. Barclays, for example, is at about 170 basis points and HSBC 145.

To get a sense of what is a bad figure, let us take Bear Stearns, the bank that needed an emergency bailout last week. In the days and hours before the crisis hit Bear Stearns, its CDS price hit 720 points. The message being sent out by the credit markets was clear - the bank's debt is very high risk.

So what are the other interesting figures? In the UK it is worth noting HBoS. Its CDS price was about 235 points last week, a long way from seriously worrying but markedly higher than most other British banks. This reflects its high mortgage exposure in the UK, its relatively high exposure to certain types of near-prime mortgages in the US and its slightly higher dependence on financial markets to fund lending.

More risky is Alliance & Leicester, whose price was about 342 points last week, again reflecting its high dependence on wholesale financial markets, which have become frozen in recent months. But the real horrors are in Iceland.

Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world.

Of course, no one can be sure that disaster looms for anyone, but the figures on credit default swaps show clearly where investment professionals think the big risks are.

You have been warned.

Any one know the cd for abbey?

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Being a numpty, I found this article extremely interesting. I was on verge of putting some funds into Kaupthing, dont think I will bother. Perhaps someone with more knowledge than me, can comment

http://www.thisismoney.co.uk/investing-and...mp;in_page_id=3

Is your bank about to go bust? Before anyone gets too panicked by this aggressive opening gambit, I should say that despite Northern Rock and now Bear Stearns in the US, the likelihood of any High Street bank going bust is slim indeed....You have been warned.

I read somewhere that the ONS has just taken CDs out of the CPI basket so you should be safe, or not.

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Well, can't no tell you Icelandic banks' CDS levels (but they must be really high - into 600-700 area if not worse after Bear Stearns going bust), but it's soooooooo true that there is a veeeeeeeery good reason why they pay extra. Of larger financial institutions in the UK, Lloyds, HSBC and Santander (=Abbey) are considered the safest by the CDS market (5y spread 135-150 area), Barclays is a bit south of 200 while HBOS is around 380 if my memory is OK. Not sure where A&L would be, but should be no better than HBOS. CDS crossing 1000 would clearly indicate a solvency trouble.

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Even lloyds is much higher than I'd expected, tbh.

Were one to buy this insurance for the 35k for which you are "protected" it would cost you £450 per Annum.

That makes the risk seem quite tangible, for me in any case.

Is this a sign of the times? would it have been a great deal lower a few years back?

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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