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CDS Movement More After Negative Credit Rating Event
Credit default swaps spreads and bond yields move more following a negative sovereign rating announcement by credit rating agencies than after positive events, according to the European Central Bank.
Credit default swaps spreads and bond yields move more following a negative sovereign rating announcement by credit rating agencies than after positive events, according to the European Central Bank. An ECB research paper revealed that sovereign bond yield spreads increased 0.08 of a percentage point and CDS spreads widened 13 basis points after a negative announcement, while bond yield spreads fell by 0.0007 of a percentage point and swap spreads narrowed only 0.9 bps following a positive one.