Landsbanki bonds settled at 1.25% and 0.125%
In an auction to cash-settle credit default swaps (CDSs) tied to Icelandic bank Landsbanki, recovery rates on its senior and subordinated debt were set at 1.25% and 0.125% today, respectively.
When CDSs are cash-settled, protection sellers pay protection buyers the par value of the underlying bonds, minus the recovery rate. The results of the Landsbanki auction mean sellers of protection on senior debt will pay 98.75% of par to settle the contracts. Protection-sellers on the bank’s subordinated debt, meanwhile, will pay 99.875%.
The cash-settlement
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