Fan and Fred: CDS Trigger Update
Banks to Discuss Closing Fannie, Freddie Credit Swaps
Credit-default swap market makers will discuss in New York today whether contracts on $1.47 trillion of Fannie Mae and Freddie Mac bonds must be closed after the U.S. government took over the companies, according to an industry body.
The call will determine whether enough dealers agree that the rescue triggers a so-called “credit event,” said Louise Marshall, spokeswoman for the International Swaps and Derivatives Association in New York. A credit event forces payment on the contracts, ending the period of protection, in exchange for the underlying bonds or cash equivalent.
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