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The liquidity crunch in the global market can be used to negotiate a better deal for Saudi Arabia. Still, it's hard to know how good it will be without knowing

• cinquemb 7y ago
  > Still, it's hard to know how good it will be without knowing more details. Yeah, for all we know they could have loaded up on CDS on O&G plays and stand to offset any losses just by triggering default clauses on the frackers.
  • dmurray 7y ago
    Is the CDS market big enough to do that? It's big, but the oil market is massive.
    • cinquemb 7y ago
      Hard for me to say, a lot stuff is traded over the counter, and one can get short exposure alot of different ways. Blackrock[0] has about $10 trillion notional for the single name cds market in 2016, estimated in 2017 that there was about ~$15,000 million avg daily volume in HY, and ~$26,000 million in IG (cash traded bonds, etfs, and cdx) and that's not considering the notional on the derivatives (swaps/options) on those. [0] https://www.sec.gov/spotlight/fixed-income-advisory-committee/blackrock-next-generation-bond-market-fimsa-011118.pdf https://www.sec.gov/spotlight/fixed-income-advisory-committe...
      • dmurray 7y ago
        By comparison, Saudi Arabia produces 12 million barrels of oil a day: if the price drops $30 they need to make $360 million per day to cover that, or $30 billion if they carried out the trade over a three-month period. If the total single-name CDS market is $10t and $1t of that is in oil and gas firms...it doesn't seem out of the question you could get a $30b position. Not that I really believe this is what's going on.