CREDIT default swaps (CDS) on Greek debt shot up yesterday as Greece confirmed it was looking to hold a referendum on the EU bailout package.
Five-year CDS soared 45.36 per cent, because investors saw an increased chance of an official “credit event”.
If a haircut on private holdings of debt is “voluntary”, CDS are not triggered. However, if the referendum rejects the bailout, a non-voluntary default may occur.
It all comes down to a decision from the 17-strong determinations committee of the international swaps and derivatives association.