Panic in Gulf at $50 Oil Recedes as Reserves Soothe CDS Market
- Default swaps dropping after August spike on crude, China
- CDS correlation to Brent reversed as oil stayed below $50
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Investor concern a Gulf nation could default is receding, even with oil trading below $50 per barrel.
Abu Dhabi’s credit-default swaps, contracts insuring the emirate’s debt against non-payment for five years, dropped 19 basis points since a two-year peak on Aug. 24, to 61, according to prices compiled by CMA. Saudi Arabia’s fell 46 basis points. The swaps had spiked amid concern that China’s economy was slowing and as oil slumped amid a supply glut. Brent crude was trading at $48.28 a barrel at 2:49 p.m. in Dubai on Monday.