Warning: CDS (Credit Insurance) Is Blowing Up

by Chris

I’ve been waiting for the junk debt universe to signal “game on.”

It’s doing that now.

Along with the credit spreads blowing out (see above) the Credit Default Swap (CDS) market is blowing up and out for junk debt.

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Now that’s a move.

As OptionSellers.com can confirm, when a market busts a move against you like this it can be impossible to get out of the way.  It blows up and your portfolio blows up.

In other words, funds are very much on the wrong side of this, and if/when actual defaults show up there won’t be anybody there to pay out on the “insurance” policy.

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