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Emerging market CDS volume rose 46 pct in 2014 - EMTA
February 5, 2015 / 5:23 PM / 3 years ago

Emerging market CDS volume rose 46 pct in 2014 - EMTA

NEW YORK, Feb 5 (Reuters) - Emerging market credit default swaps trading volume rose 46 percent in 2014 versus the prior year, driven in large measure by the economic and political ructions related to energy in both Russia and Brazil, according to a survey released on Thursday.

EMTA, the emerging markets debt trading and investment industry trade association, said volumes for CDS totaled $1.56 trillion last year versus $1.064 trillion in 2013.

Fourth-quarter 2014 trading volumes rose 39 percent to $385 billion on a year-on-year basis. They also increased by 2 percent from the third quarter of last year.

CDS act as a kind of insurance for investors who own debt against potential default or restructuring.

Brazilian CDS trading volumes were the largest of any single sovereign during the fourth quarter at $68 billion.

A corruption scandal at Brazilian state-run oil company Petrobras and a faltering economy raised investor concerns about Latin America’s largest economy.

Trading of Petrobras CDS contracts tripled in the fourth quarter versus 2013 to $6 billion. Petrobras’s top management quit this week, following reports that Brazilian President Dilma Rousseff was poised to sweep away the executives.

The latest Reuters poll of Brazilian gross domestic product for 2015 shows a rise of 0.5 percent and 1.8 percent in 2016. That’s down sharply from the poll taken in October.

Trading in Russian CDS during the fourth quarter surged 112 percent to $47 billion from the same period a year earlier, however that was down 30 percent versus the prior quarter. Russia’s state-run energy company Gazprom had $4 billion in CDS trading volume.

Russia’s economic activity has fallen precipitously due to a combination of plunging oil prices, rising inflation and Western sanctions linked to the conflict in Ukraine. Inflation hit 15 percent in January, a result of the slide in the rouble. .

Turkish and Mexican sovereign CDS trading volumes were behind Brazil and Russia at $36 billion each, EMTA said in a statement. Mexican state-run oil company PEMEX had $2 billion in trading volume.

EMTA surveyed 13 major international banks and broker-dealers on emerging market CDS contracts. (Reporting by Daniel Bases; Editing by James Dalgleish)

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