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Investment Analysis Clubs / Macro Economic Trends and Risks
|Subject: Re: Will the Bailout Plan Work?||Date: 10/5/2008 12:15 PM|
|Author: WendyBG||Number: 257737 of 499252|
<Would you lay out the consequences of a CDS cascade? All I can grasp is that it would be a Really Bad Thing.>
A CDS cascade would be a Really Bad Thing. Great way to put it.
A CDS (Credit Default Swap) is a private, unregulated insurance contract.
Let's say that I buy a bond, because I want the interest payments. Looking at Fidelity, today, here is one choice.
GE CAPITAL INTERNOTES 5.00000% 03/15/2017 FR
Pay Frequency SEMI-ANNUALLY
Yield to Maturity 7.45%
Maturity Date 03/15/2017
Moody's Rating AAA
S&P Rating AAA
Wow, that looks like an excellent yield, especially given the high rating. But, even before the financial crisis started, there is always a possibility of default.