Oct. 7, 2009 (Business Wire) -- Fitch Solutions, a division of the Fitch Group, says market uncertainty over the pace of global economic recovery led to a significant rise in global CDS liquidity last week, with the US and European basic materials sectors most impacted.
Average global CDS liquidity improved from 10.51 last Wednesday to 10.42 by Friday's close.
"The release of worse than expected US jobs data last Friday caused a significant rise in CDS liquidity on both sides of the Atlantic and was particularly channelled through the basic materials sector," says Thomas Aubrey, Managing Director, Fitch Solutions, London.
"Europe still remained more liquid than the Americas region with Fitch's European CDS liquidity index closing at 9.81 on Friday 2nd October versus 10.02 for the Americas region," Aubrey added.
More generally, Russia, Mexico and South Africa remain the most liquid Sovereign CDS names, whilst in the Americas MGIC Investment Corporation and Radian Group Inc. are now trading with the most liquidity. Kabel Deutscheland, Nielsen Company and OJSC Gazprom remain the most liquid European names whilst Korean companies continue to dominate liquidity in the Asia Pacific region.
The full Fitch Solutions' Global CDS liquidity scores commentary, which covers the top five most liquid CDS corporate names in Europe, North America and Asia, as well as the top five most liquid global sovereigns, is available on the agency's website: www.fitchratings.com under - "Fitch Solutions' Global Liquidity Scores Commentary Issue 19.
In general, the liquidity of a credit derivative asset increases when it is showing signs of financial stress in combination with a significant amount of debt outstanding and/or changes in its capital structure, including new issuance. The liquidity scores of assets have historically traded between 4 at the most liquid end, through to 29 at the least liquid end. Entities also tend to be more liquid when there is agreement about present value but disagreement about future value due to heightened uncertainty surrounding the entity.
Launched in November 2008, Fitch's liquidity scores cover the most widely traded credit derivative assets, helping market participants identify their exposure to the most liquid and least liquid assets, and strengthen their liquidity risk management procedures.
For related research, see "CDS Market: Overall Liquidity Still Rising Despite Market Stresses," published on 25 November 2008, which is also available at www.fitchratings.com.
Fitch Solutions, a division of the Fitch Group, focuses on the development of fixed-income products and services, bringing to market a wide range of data, analytical tools and related services. The division is also the distribution channel for Fitch Ratings content. Fitch Solutions' product offerings include Fitch Ratings' research delivery, risk and performance analytics, surveillance tools, structured finance workflow solutions, and pricing and valuation services. The division's service offerings include Fitch Training, a specialist training firm for financial professionals, and Advisory Services, which provide customized consulting to help clients better, understand their risk.
The Fitch Group also includes Fitch Ratings, a global rating agency dedicated to providing the world's credit markets with independent and prospective credit opinions, and Algorithmics, a leader in enterprise risk management solutions. The Fitch Group is a majority-owned subsidiary of Fimalac, S.A., headquartered in Paris, France. For additional information, please visit 'www.fitchratings.com'; 'www.algorithmics.com'; and 'www.fimalac.com'.
