Fitch Case Study: GM Credit Default Swaps vs. Bond Liquidity

Business Wire, Feb 18, 2005

NEW YORK -- Fitch Ratings published a study that tracked GM (and GMAC) credit default swap (CDS) and bond trading between July 2004 and January 2005, focusing on the number of trades executed.

The study found that General Motors' bonds exhibit significant variability with regard to the number of large trades executed on a daily basis, as might be expected. However, the magnitude of bonds traded on any given day can be very significant, with upwards of $3 billion in bonds changing hands on only one day recently. Trading volume in GM CDS may be even more variable than that of bonds. It is noteworthy that the level of CDS activity in GM may have reached the point where trading volume is, at times, generally on par with the number of large trades executed in the bond market.

GM is one of the most prominent issuers in the corporate bond universe, and GM CDS are the second most included named in synthetic collateralized debt obligations (CDOs), behind Ford, as disclosed in several Fitch analyses of the CDS market. Fitch currently rates GM and GMAC at 'BBB' with a Negative Outlook.

The full report 'General Motors as a Case Study - CDS versus Bond Liquidity' is available on the Fitch Ratings web site at www.fitchcdx.com.