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by xiphias2 2286 days ago
The liquidity crunch in the global market can be used to negotiate a better deal for Saudi Arabia. Still, it's hard to know how good it will be without knowing more details.
1 comments

> Still, it's hard to know how good it will be without knowing more details.

Yeah, for all we know they could have loaded up on CDS on O&G plays and stand to offset any losses just by triggering default clauses on the frackers.

Is the CDS market big enough to do that? It's big, but the oil market is massive.
Hard for me to say, a lot stuff is traded over the counter, and one can get short exposure alot of different ways. Blackrock[0] has about $10 trillion notional for the single name cds market in 2016, estimated in 2017 that there was about ~$15,000 million avg daily volume in HY, and ~$26,000 million in IG (cash traded bonds, etfs, and cdx) and that's not considering the notional on the derivatives (swaps/options) on those.

[0] https://www.sec.gov/spotlight/fixed-income-advisory-committe...

By comparison, Saudi Arabia produces 12 million barrels of oil a day: if the price drops $30 they need to make $360 million per day to cover that, or $30 billion if they carried out the trade over a three-month period.

If the total single-name CDS market is $10t and $1t of that is in oil and gas firms...it doesn't seem out of the question you could get a $30b position. Not that I really believe this is what's going on.