Credit Curves, CDS Curves, and CDX Quote Conventions
Summary
A credit curve describes credit pricing across maturities, while a CDS curve is the version built from credit default swaps for one reference entity. Credit curves can also differ by instrument and debt seniority, so bonds, loans, and CDS may not align exactly. The answer notes that Bloomberg can display available CDS quotes, but many entities have liquid quotes only at a limited maturity, often five years.
The document also distinguishes North American investment-grade and high-yield CDS indices. CDX IG is commonly quoted as a spread, while CDX HY is commonly quoted as a price, similar to a bond. Conversion tools can translate between spread, price, and upfront payment conventions. These conventions vary across indices, so interpreting the units correctly matters. The discussion is a brief overview rather than a guide to curve construction or pricing; quote availability and conventions depend on the instrument and market.
Key ideas
- A CDS curve tracks CDS pricing across maturities for one reference entity.
- Credit curves can vary across debt instruments and seniority tiers.
- CDS quote coverage may be limited to liquid maturities for some entities.
- CDX IG is commonly quoted as a spread, while CDX HY is commonly quoted as a price.
- Always identify quote units before comparing or converting index quotes.
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Full text
# The difference between Credit Curve and CDS Curve # The difference between Credit Curve and CDS Curve What's the difference between the credit curve and the CDS curve? Can I read the CDS curve from the Bloomberg terminal? for both single name and index? Also, can someone please explain the difference between the CDX IG and HY? I recall one is quoted in spreads, and another is quoted in price. ## Answer by Dimitri Vulis (score 7) https://quant.stackexchange.com/a/73591 You should split this question into several. The same debtor can have slightly different credit curves for different products and tiers, eg 1at lien loans, senior unsecured bonds, subordinated... it's normal to have some basis between them. A CDS curve is a particular credit curve that refers to credit default swaps for different lengths of time. If Bloomberg knows CDS quotes, then you can see them in CDSW. However Bloomberg probably doesn't know CDS quotes for many obligors you may be interested in. For many obligors, Bloomberg only knows a 5-year CDS spread, since the rest of the CDS curve isn't liquid enough. CDX NA IG is an index of CDS on a list of North American Investment Grade obligors that seldom default. It is usually quoted as spread, just like a CDS. CDX NA HY is an index of CDS on a list of North American High Yield obligors that sometimes default. It is usually quoted as price, like a bond. CDSW helps you convert between spreads, prices, and upfront fees. The conversion is well-documented and relatively simple. The different quoting conventions for different indices don't really make much difference. There are other CDS indices, also for Europe, Japan, and others. Some are quoted as spreads, others as price, it really doesn't matter as long as you correctly keep track of what the quote means, e.g. don't misinterpret 99 bps CDX IG quote as a price, don't misinterpret 101 (%) CDX HY price as a spread in bps. ## Answer by Michael Brown (score -1) https://quant.stackexchange.com/a/73595 The credit curve is the difference in yield between two credit instruments of the same type but different maturities. The CDS curve is the difference in credit default swap prices for the same reference entity but different maturities. Yes, you can read the CDS curve from the Bloomberg terminal. For single name CDS, you can use the function CDSW . For index CDS, you can use the function CDS . The CDX IG is a credit default swap index that references a basket of investment grade corporate debt obligations. The CDX HY is a credit default swap index that references a basket of high yield corporate debt obligations.
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