Greek auction result could undermine CDS use

An early trigger is unlikely, but fears of distorted auction outcome remain – and could undermine the use of credit default swaps as a hedge, say market participants

Technical factors could distort the result of any auction on Greek sovereign credit default swaps (CDSs), market participants warn – an outcome that could further erode confidence in the CDS market.

"Anyone who has a CDS position is interested in the outcome of this, and that includes banks hedging derivatives or loan portfolios, as well as investors with bond exposures. Anyone who has got Greek CDS, or sovereign CDS positions more generally, will be watching to see what the outcome will be,"