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Sunday, November 8, 
8:24 am

After bailout, default swaps on Citi head lower

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citi_logo.gifCredit default swaps on Citigroup Inc. tightened right off the bat after the U.S. federal government stepped in with a $20 billion cash infusion and $306 billion in guarantees against losses from the bank's mortgage-related assets.

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Early in the morning the costs of default contract fell 19 basis points to 481.75 basis points, according to data from CMA DataVision via Reuters. That translates into a cost of $481,750 annually to ensure against default on $10 million of Citi's debt. As the company's stock went into free fall last week, spreads on its CDSs gapped wider by leaps and bounds. In only a week's time, the spread on Citi's swaps went from 200 point range all the way to 360 basis points on Wednesday, only to rise another 40 points to around 400 basis points on Thursday. By Friday, issuers had raised the cost another 80 points to roughly 481 basis points, as concerns about whether Citi could survive the weekend mounted.

Update: By the late morning the cost of Citi's swaps had plunged roughly 250 basis points, down from about 500 basis points late Friday.

- George White      

See Reuters story  
See Dealscape post Citi's bailout
See Dealscape post Cit's swaps






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