Why Greek Sovereign CDS Data Became Stale After the 2012 Credit Event

Summary

The document explains why a sovereign credit default swap dataset can show an unchanged Greek spread for several years even though the number may look like a continuing market quote. Greece experienced a credit event in 2012, followed by an ISDA auction that valued defaulted bonds and enabled cash settlement of the affected CDS contracts. The answer says this settlement effectively ended that series of Greek CDS contracts for a period, making the displayed pre-restructuring spread misleading as an indicator of active trading.

The response attributes the later gap to the lack of suitable outstanding reference debt, rather than a ban on CDS trading. It says trading resumed after Greece issued external-law eurobonds in 2017. It recommends checking alternative data sources and points to a contemporary discussion of the bond issuance, while noting that similar gaps may follow sovereign defaults elsewhere. These are claims from the answer, not a detailed examination of vendor methodology or a documented explanation of the specific repeated data value, so researchers should verify the series and its sourcing before drawing market conclusions.

Key ideas

• A credit event and settlement through an ISDA auction can end the affected sovereign CDS contracts.
• A stale pre-restructuring spread may not represent a tradable market quote during the subsequent gap.
• The answer attributes the Greek CDS trading gap to a lack of suitable reference obligations, not a ban.
• It says CDS trading resumed after Greece issued external-law eurobonds in 2017.
• Researchers should check vendor methodology and alternative sources when sovereign CDS observations remain unchanged.

Tags

# Reason for stale sovereign CDS spreads (e.g. Greece)


# Reason for stale sovereign CDS spreads (e.g. Greece)












I have a dataset of CDS spreads for European sovereign from Thomson Reuters Datastream. I noticed for some entities in some timeframes, spreads are essentially stale. For example in the case of greece roughly in the timeframe between 2012-2017 spreads were at exactly 14904,36 bps. What is the precise reason for this? I am assuming that CDS trading for Greece was banned during that timeframe or banks weren't willing to issue CDS contracts. Does anyone have any idea what exactly the reason was? Preferably with a citable source.

## Answer by Dimitri Vulis (score 4)

https://quant.stackexchange.com/a/47559

Reuters is not a good source of data. (Maybe try Markit?)

Greece had a "credit event" in 2012. An ISDA auction determined how much a defaulted bond was worth, all CDSs were cash-settled using the bond price from the auction, and that was the end of Hellenic Republic CDS for a few years. It is misleading to indicate that CDS continued to trade at the pre-restructuring spread.

Until 2017 CDS was not banned (who could ban it?). But there was no outstanding debt suitable to be a reference obligation in a CDS contract. (There were some local-law bonds, "private sector involvement" (PSI) debt..) as soon as Greece issues external-law eurobonds in 2017, trading CDS resumed.

You can cite https://www.brookings.edu/blog/up-front/2017/11/30/to-swap-or-not-to-swap-greece-issues-5-new-bonds

You should see similar gaps after Argentine sovereign defaults.

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