Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

Standard Chartered’s CDS Jump Following Block’s Wager

Muddy Waters LLC Director Carson Block said at a May 10 conference in Las Vegas that he’d bought five-year credit-default swaps on Standard Chartered for about 85 basis points. Photographer: David Paul Morris/Bloomberg
Muddy Waters LLC Director Carson Block said at a May 10 conference in Las Vegas that he’d bought five-year credit-default swaps on Standard Chartered for about 85 basis points. Photographer: David Paul Morris/Bloomberg

(Corrects to remove reference to 22 percent gain in headline and first paragraph.)

May 13 (Bloomberg) -- Carson Block’s bet against Standard Chartered Plc, the British lender that makes most of its profit in Asia, triggered a surge in the cost of protecting against losses on the British lender’s debt.

Block, the short-seller who runs Muddy Waters LLC, said at a May 10 conference in Las Vegas that he’d bought five-year credit-default swaps on Standard Chartered for about 85 basis points. The cost of CDS tied to the lender’s debt jumped to 103.98 basis points today, according to data compiled by Bloomberg. The shares fell 1.9 percent to 1,552.5 pence in London trading.

The investor cited the worsening quality of the London-based bank’s loans, saying a $1 billion loan to Samin Tan, chairman of Bumi Plc, the coal company at the heart of a dispute between co-founders Nathaniel Rothschild and Indonesia’s Bakrie family, and loans to Far East Energy Corp. were “red flags.”

“They are not saying short Standard Chartered, it’s going to zero -- it’s more nuanced,” said Cormac Leech, a banking analyst at Liberum Capital Ltd. in London with a hold rating on the stock. “They’re saying CDS spreads are low and they are buying.”

Block may have considered the CDS cheap compared with larger banks, said Leech. By comparison, Goldman Sachs Group Inc.’s CDS traded at 106.82 basis points and Morgan Stanley 121.17 basis points, according to data compiled by Bloomberg.

Julie Gibson, a spokeswoman for Standard Chartered in New York, declined to comment on May 10. Doris Fan, a Hong Kong-based spokeswoman at the lender, also declined to comment.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.