Bond Bears Dust Off Debt Insurance on Wave of Corporate Pain
- Trade volumes increase as companies fail to meet obligations
- Rallye, New Look debt protection set to pay out after defaults
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Corporate debt insurance that fell out of favor after the financial crisis is returning to vogue as default rates rise and a series of high-profile failures pay off for short sellers.
Credit-default swaps trading increased 7% this year, with average weekly volumes of $58 billion, according to the latest data from the International Swaps & Derivatives Association. Payouts on contracts linked to French retailer Rallye SA and U.K. fashion chain New Look Retail Group Ltd. have boosted the value of derivatives, while investors are buying up others on expectation of further windfalls.