Investors in the credit-default swap market are showing a growing risk of financial distress for some big banks and insurers, according to the Wall Street Journal Europe.The cost of protection on debt by these companies is soaring even as credit market concerns recede.
Mounting losses among financial institutions in the credit-default market could backfire if defaults materialize. Banks and bond insurers have stretched themselves pretty far already, writing billions of dollars of credit protection traded.
“I don’t think it’s a matter of liquidity for many of the financial firms. It’s a matter of solvency,” said Tim Backshall, chief derivatives strategist at Credit Derivatives Research LLC in