Scotland secession: would UK CDSs be affected?
If Scotland votes for independence in September, it will be a big moment for credit markets – and, thanks to a quirk in the wording of legacy CDS contracts, a potential succession event for holders of protection on UK government debt. Is it worth investors buying UK CDSs as a hedge against the uncertainty? Tom Osborn reports
Everybody likes getting something for nothing. Should Scotland vote in favour of independence on September 18, holders of credit default swap (CDS) protection on the UK may be in line for just that, thanks to a grey area in the wording of the contracts that underpin them.
If Scotland were to secede from the UK – something that could happen as early as the first quarter of 2016 – it would probably take with it a 10% GDP-weighted share of the UK's £1.3 trillion debt pile, as measured by
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