The CDR corporate CDS spread indices are now at levels similar to pre-Lehman days. Does this make sense if default rates are higher than what we expected six month ago. Some would argue that this is a technical rally based on short-covering of CDS positions, but we still have to look at the numbers and wonder whether this is a broader signal of confidence. Its is notable that the corporate spread on actual bonds are still higher and while they have also declined there is a marked divergence between corporate spreads and CDS spreads for a negative basis.
CDR Liquid Corporate CDS spread index
CDR Liquid High Yield CDS spread index
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