A Look at Boaz Weinstein’s Sovereign CDS Example [Updated]

Updated on

Boaz Weinstein has been making waves lately. After he recommended that traders jump into the obscure CDS index that is losing JPMorgan millions his reputation has  has soared. We analyzed the JP Morgan trade in detail, earlier today.  Long before his win at JPMorgan, Bill Ackman described him as the smartest person in credit.

At the Boys & Girls Harbor conference in February where he announced that he was shorting the index, he pointed to an interesting trend in the CDS markets.

Weinstein showed that 5-year credit default swaps on AAA rated European countries offered better risk adjusted turns than those from PIIG countries. He mentioned that a basket of Danish, Swedish and Norweigen 5-year CDS were up 228% from June 2011. Portugese, Italian and Irish 5-year CDS were only up 61%.

We were curious how this example has worked out.

First here’s a look at the charts for three of the PIIG countries from Bloomberg.


A Look at Boaz Weinstein's Sovereign CDS Example [Updated]

Since the beginning of February Italy’s CDS value has risen from just above 400 to 564. That’s an increase of 164 or 41%.


Ireland’s CDS has risen in value from just above 600 to 723, an increase of 123 or 20.5%.


Since the beginning of February Portugal has seen a fall in value from 1400 to 1170, a fall of 230 or -16.42%. It should be noted from the chart that Portugal’s price from thaat date is an outlier.

So the returns for Italy Ireland and Portugal for the period are 41%, 20.5% and -16.2 % respectively. That’s an average return of 15.1%

Now for three of the AAA rated countries, Denmark, Norway and Sweden.


Denmark’s value has risen from about 125 to 133 in the period a rise of 8 or 6.4%.


Norway’s value has fallen from around  35 to around 31. That’s a change of -4 or -11.4%.


Sweden’s CDS value has risen from around 50 to 69. That a total increase of 19 or 38%.

So for the AAA rated countries Denmark, Norway and Sweden the CDS changes were respectively 6%, -11% and 38%. That’s an average return of 11%.

The total return from the PIIGS basket has been better than the AAA basket since February. There are clear reasons why this might be the case, as the situation in Southern Europe has deteriorated far quicker than almost anyone expected.

Weinstein’s example has not followed the past trend in the months since he presented it. But playing CDS isn’t a quick get in and out game.

We’ll return to this in a few months to evaluate where the CDS are trading at.



This post has been changed to reflect that Mr. Weinstein did not recommend the trade but used it as an historical example.

Leave a Comment