This Lehman Brothers CDS settlement came in a 8.625%, meaning if you were short the swap you have to pay the holder of the contract 91.375% of the face value of the bond. It’s a zero sum game, so some will have big gains and others big losses. With billions of dollars raised to meet the obligations arising from the contracts by selling stocks, commodities and other asset classes, we may be set up for a relief rally.
EUR/USD held the first test of 1.3360 and trades now at 1.3380. The no-brainer trade would be a tiny long with a tight stop below 1.3350 for a rebound to 1.3600/1.3700…
