Baltic CDS: Bullish Breaks Signal Further Compression

Baltic credit default swap (CDS) markets have surged through the latter half of September, with the Latvian 5-year CDS leading the way. We highlighted the break of resistance at 600bps as a particularly good signal on September 22 (see CDS Poised to Compress, Despite Political Woes in our online service) and the spread has since narrowed to 460bps at the end of September. The CDS is now likely to test a key trendline resistance level at 450bps, with a break setting the stage for further compression all the way back to 300bps.

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