United States 5 Years CDS - Historical Data (2024)

FAQs

What is the value of the US 5 year credit default swap? ›

The United States 5 Years CDS value is 37.32 (last update: 22 May 2024 13:45 GMT+0). This value reveals a 0.62% implied probability of default, on a 40% recovery rate supposed.

The average CDS spread for the U.S. Treasury is 38.52 basis points.

Data about the historical credit default swap market is available from three main sources. Data on an annual and semi-annual basis is available from the International Swaps and Derivatives Association (ISDA), which dates back to 2001, and from the Bank for International Settlements (BIS) since 2004.

We infer the likelihood of a U.S. default from these CDS premiums and estimate an increase in the market-implied default probability from about 0.3–0.4% in 2022 to about 4% in April 2023, which is lower than it was in July 2011 and about where it was in October 2013.

One of the risks of a credit default swap is that the buyer may default on the contract, thereby denying the seller the expected revenue. The seller transfers the CDS to another party as a form of protection against risk, but it may lead to default.

The average of CDS spreads in our sample is 151 basis points. They increase monotonically from 17 to 603 basis points as the credit ratings of the CDS reference entities deteriorate from AAA to CCC.

While no one knows precisely what a default would entail, consumers can rest assured that their Treasuries and certificates of deposit are reasonably safe.

While Treasury prices can vary significantly over the term of the bond, CDs don't lose value based on market conditions. This can provide an additional level of comfort for organizations investing in CDs because you know that principal is not impacted by market fluctuations.

A higher rate set by the Federal Reserve means lower returns on T-bills. By contrast, CDs and high-yield savings accounts tend to give higher returns as the Federal Reserve benchmark rate increases.

Real-time and historical information about CDS can be extracted from the Bloomberg terminal.

How to check CDs spread in Bloomberg? ›

Understanding the Credit Default Swap Index (CDX)

A credit default swap (CDS) is an over-the-counter derivative contract that offers one counterparty protection against a credit event, such as the default or bankruptcy of an issuer. It can be thought of as insurance in the financial world.

The FDIC Covers CDs in the Event of Bank Failure

But the recent regional banking turmoil may have you concerned about your investment in case of a bank failure. CDs are treated by the FDIC like other bank accounts and will be insured up to $250,000 if the bank is a member of the agency.

CDs and Treasurys are both safe, relatively riskless investments. Since CDs are considered deposit accounts, they're covered by Federal Deposit Insurance Corp. (FDIC) insurance, up to $250,000 per depositor, per bank. You can check if a bank is FDIC-insured on the BankFind Suite website.

In addition to hedging credit risk, the potential benefits of CDS include: Requiring only a limited cash outlay (which is significantly less than for cash bonds) Access to maturity exposures not available in the cash market. Access to credit risk with limited interest rate risk.

CDS help to mitigate the risk by providing a form of insurance. The CDS market is worth around $3.8 trillion, according to the International Swaps and Derivatives Association (ISDA).

As the bank is required by law to insure all loans greater than $10,000,000, it purchases a credit default swap at 2% of the insured principal amount. Therefore, the bank pays the CDS seller 4% of the insured principal amount (4% of $80,000,000) every year for the next 15 years.

CDS contracts on sovereign obligations also usually include as credit events repudiation, moratorium, and acceleration. Most CDSs are in the $10–$20 million range with maturities between one and 10 years. Five years is the most typical maturity.