Betting $4.8 billion in CDS on U.S. debt default – Jul. 26, 2011

Sunday poker 2

Image by Mait Jüriado via Flickr

NEW YORK, CNNMoney — With its winners and losers, Wall Street is often likened to a big casino for obvious reasons. And even when it comes to a possible U.S. default next week, at least a few financial players are looking to cash in on such a bleak turn of events. A small camp of investors are betting that the U.S. government will default on its debt, and they’re putting $4.8 billion of their chips on the table.

In the event of a default, that’s how much financial firms will have to pay out to investors who bought credit default swaps against the U.S. government, according to figures from the Depository Trust and Clearing Corp. With only a week to go until the government breaches its debt ceiling, are these few investors likely to come away with the winnings of a lifetime? Probably not, experts say.”I think we’re a long way away from considering this hypothetical [case],” said Otis Casey, director of credit research at Markit.Debt ceiling: What happens if Congress doesn’t raise it?

A credit default swap, or CDS, is basically an insurance contract against a default, and in this case, $4.8 billion is quite meager in comparison to what those on the other side of the bet are putting down.

via Betting $4.8 billion in CDS on U.S. debt default – Jul. 26, 2011.

Strange Random Gambling Quote:

Gambling with cards or dice or stocks is all one thing. It’s getting money without giving an equivalent for it. – Henry Ward Beecher


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Posted on July 27, 2011, in Article and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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