CDS spreads continue to widen

Credit default swap (CDS) spreads on financial institutions have continued to widen, despite the bailout of US insurer American International Group (AIG) by the US Federal Reserve Board on Tuesday.

The Credit Derivatives Research (CDR) Counterparty Risk Index, which averages the credit spreads of the 15 largest credit derivatives dealers, hit an all time high for the third day running, jumping to 419 basis points up from 389bp on September 16 and 317bp on September 15.

US Investment banks once again experienced the brunt of the spread widening. The cost of protection on Morgan Stanley rose to 875bp yesterday, up from 496.7bp on September 15, according to London-base data provieder Markit

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