Steve Blitz Morning Notes

Credit default swap spreads have come in for all banks since hitting their wides at the beginning of March. Most spreads are trading close to the pre-Lehman levels of last summer. Not great, but a great improvement as it reflects a general easing of financial counterparty concerns that is also evident in two-year swap rates trading around 40 -- a respectable recessionary level.

The main exception is Citi. As the chart below from Bloomberg LP illustrates, 5-year CDS is well in from the wides of March, to 350bps from around 650bps. Improvement, yes, but the spread is still trading wide to its year-end 2008 level let alone where Citi CDS spreads traded before the Lehman affair. Credit markets have improved but holders of Citi debt are still willing to pay up for insurance against default.


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