Lehman auction II

Buffalojump

Herd going over the cliff

According to this post  from the DTCC (The Depository Trust and Clearing Corporation), I learn that only $6 billion are left as open positions on the Lehman credit default swaps, so I correct myself, the deals to close the positions have been going on for some time, and only a tiny portion of $6 billion needs to clear by the October 21 settlement date.

But most importantly, it gives us an idea of how brutal it must have been out there in the swap world, since Lehman’s demise. It’s still my estimate that swaps outstanding before bankruptcy were $4 trillion, or 10 times Lehman’s $400 billion bond debt, which have been closing at a breath-taking pace since then.

An extraordinary event, which would in itself explain the lack of liquidity that we have been witnessing, and consequent fear and seizure of all banks.

The good news is that this hurdle is over.

The bad one… well, let’s hope that the IMF members plan, as well as the Eurozone action plan, do their magic. If not, tomorrow promises to be one more painful step over the edge.

Finally, I also learned that the total volume of CDS has been coming down, to $35 trillion as of October 9  –about $5 trillion per month since June.