CDS: Argentina & Venezuela To Underperform

August 2008 | Market Strategy

Even at current high levels, there is little incentive to sell protection on Argentine and Venezuelan debt via 5-Year Credit Default Swaps (CDS), in our view. Both contracts are fairly priced, and could even push higher over the coming months given the associated risks. In Argentina, a lack of policy consensus in the upper reaches of government, and broad-based weakness across the soft commodities complex, warrant concern. In Venezuela, meanwhile, heightened 'Chávez risk' ahead of November's regional elections could keep investors on the sidelines.

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