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RIG CDS Market 500/550, +100bps On The Day, All Time Wides

Courtesy of Tyler Durden

Following yesterday’s announcement that the US has asked a federal judge in Houston to reject a bid by Transocean Ltd. to cap its liability in the explosion of the Deepwater Horizon and resulting spill at $27 million, Transocean is literally falling apart. Its CDS level has surged by over 100 bps today, with a market so wide at 500/550 it may need a few HFT quants to narrow it. As we commented yesterday, RIG CDS trading points up front is likely hours away should the news flow not improve. The IG9 name has caught many correlation traders with their pants down and underhedged, and is causing some serious intrinsic rumblings. The same is true for HAL and APC which also are getting punished. BP has temporarily stabilized after a few conflicted sellside analysts had some soothing words for their clients, just so respective prop desks can offload existing inventory into a last minute attempt to prop up the stock price before yet another wipeout.

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