Tuesday, 8 January 2013

Analysis- This indicator never fails but not many understand it

 

 

 


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The Credit Default Swap market has always helped me in analysing the direction of other markets including equities. ICICI Bank CDS is an excellent indicator of equity market direction.

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Analysis

ICICI Bank CDS Spread fall is good for equities

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redit spreads as measured by the CDS (Credit Default Swaps) rates are falling indicating increasing risk appetite amongst global investors. ICICI Bank CDS, which is widely traded in the Asian CDS market, has seen its five year spreads fall by 200 bps over the last one year. Five year ICICI bank CDS trades at spreads of 280bps as of January 2013 against levels of 480bps seen in January 2011.The fall in CDS spreads of ICICI Bank indicates that global investor view of the credit risk of ICICI Bank has improved. In other words an investor of ICICI Bank bonds wanting to hedge credit risk has seen hedge costs come off by 200bps over the last one year. The sharp fall in CDS spreads of ICICI Bank is reflected in the equity markets as well.

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Have a good day

Regards

 

Arjun Parthasarathy

Editor: Investors are Idiots.com

www.investorsareidiots.com

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Information herein is believed to be reliable but the editor of Investors are Idiots.com Arjun Parthasarathy does not warrant its completeness or accuracy. Opinions and estimates are subject to change without notice. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The financial markets are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved. Unauthorized copying, distribution or sale of this publication is strictly prohibited. The author of the articles may have investments in instruments that are the subject of the articles.

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