Credit-default swap volumes in contracts referenced to French hotels group Accor jumped last week as market participants traded either side of its end-of-year results released on Wednesday. Market makers were taken by surprise, however, as results were better than expected and spreads, pushed out by a flurry of protection buying early in the week, tightened again. Five-year protection on Accor had tightened to 103 basis points at press-time on Thursday, after starting the week at 110 basis points.
"A move of five basis points is fairly significant in a low volatility environment," says one trader at a French bank. The volumes were notable for a quiet week. Another trader estimated that some $50 million (notional) of trades were executed, which is about 35% more than normal.
Standard & Poor's rates Accor triple-B with a negative outlook. The short-term rating was reduced in June to A-3 from A-2 and analysts commented that it would take gradual improvement over the next year or two to upgrade the rating. The long-term rating was not downgraded. "We have no current plans to change the outlook," says London-based Standard & Poor's analyst Trevor Pritchard.
Five-Year Credit Protection On Accor