NEW YORK--(BUSINESS WIRE)--Recent credit default swap (CDS) spread movement for Petroleos de Venezuela (PDVSA) is emulating that of Venezuela, this despite credit protection for the oil giant still being priced at stressed levels, according to Fitch Solutions in its latest CDS Case Study Snapshot.
Five-year CDS on PDVSA have tightened 38% since mid-February and 19% over the past month, a trajectory similar to Venezuela. 'The CDS market is currently charging a 24% premium for credit protection on PDVSA's debt, as compared to the sovereign, up from 17%,' said Director Diana Allmendinger.
Though CDS spreads on PDVSA are coming in significantly, CDS liquidity is actually increasing. PDVSA has moved from trading in the 15th global percentile to the sixth percentile. 'the higher liquidity indicates growing market uncertainty over the future direction of CDS pricing for PDVSA,' said Allmendinger.
Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings' Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.
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