Buyers of loan-only credit default swap protection sought to cash in on their investments as spreads continued to widen last week. Traders said several buyers of LCDS sought to lock in profits by selling LCDS protection, which they bought when spreads were 20-35 basis points tighter a month ago.
LCDS spreads widened on average five-10 basis points last week in tandem with the volatility in the high-yield and equity markets. Nieman Marcus was cited as one deal that investors sold protection on, as its five-year LCDS spreads widened 25 basis points to the 135-150 context. "There is profit-taking going on," said a trader. "Buyers are monetizing on their investments with the widening of spreads."
Cablevision was another name that saw its five-year LCDS spreads widen 15-20 basis points to the 130-140 context. Eastman Kodak's five-year LCDS spreads also moved 10-15 basis points wider than the prior week to the 145-165 range. The trader added that there were also a lot of buyers of protection because of general market softening. "People are nervous about the market," he said.