Uh-oh. For those that believe CDS markets are soothsayers for financial futures, movement in both Goldman and Morgan Stanley Wednesday is well-worth paying attention to. Per Reuters:
Five-year credit default swaps on Morgan Stanley rose by 40 basis points to 796 basis points, or $796,000 a year to protect $10 million of debt, while Goldman’s swaps rose by 16 basis points to 462 basis points, according to data from CMA DataVision. As of late Tuesday, Morgan Stanley’s credit default swaps were trading as though it were rated deep into junk territory at “B2,” according to data from Moody’s Investors Service’s credit strategy group. That is 10 steps below its actual rating of “A1.” Goldman’s swaps were rating as though it were rated “Ba3,” a junk level that is nine steps below its actual rating of “Aa3,” Moody’s added.
