hard · Debt Capital Markets credit-ratings-risk
The 'CDS-Bond Basis' is defined as the difference between the CDS spread and the cash bond spread.
What does a 'negative basis' indicate?
- The bond is trading at a premium to its par value.
- CDS protection is cheaper than the spread offered by the cash bond.
- CDS protection is more expensive than the cash bond spread.
- The issuer is expected to upgrade from high yield to investment grade.
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