Insurers should take advantage of positive basis between European government bonds and their associated credit default swaps (CDSs) to gain a yield enhancement in the current low interest rate environment, according to bankers.
Positive basis exists when the spread on a CDS is greater than the spread on its underlying bond. Where this situation exists, insurers can sell their government bonds via the repo market and sell CDSs on the same name, thereby benefiting from a premium generated from the
The week on Risk.net, October 6-12, 2017Receive this by email
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