The future of financial markets hinges, for now, on credit default swaps take on Italy, Spain, and Deutsche Bank.
According to new data from Depository Trust & Clearing Corporation (DTCC), investors have taken out a net $22.7 billion in contracts on Italy's debt; $16.7 billion against Spain; and $12.5 billion on Germany’s Deutsche Bank.
Credit default swap market data was previously unavailable to investors. Lack of clarity on swaps in part drove the credit market to a near standstill worldwide over the past few months.
For instance, if such data about Iceland had been public sooner, that country’s painful unwinding and subsequent currency collapse might have been staved off.
And British retail investors heavily invested in Iceland could have avoided the massive haircut they took, as well.
Since nobody knew before which creditor might take a hit when, how much, and from what direction, the markets froze. Now, at least, the data is being made public.
The new data may calm concerns that investors and dealers have too much at risk, according to CreditSights fixed-income strategist Brian Yelvington.
“Far too much mistrust has been engendered by the lack of transparency,” Yelvington told Bloomberg.
“There's still a lot here that's not captured. But it's a step in the right direction.”
Greater transparency in a critical market is the result, Tim Ryan, the head of the Securities Industry and Financial Markets Association told the Los Angeles Times.
"This is an important initiative upon which the industry will continue to build," he said.
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