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Hanjin's Default Is Making Wave

02 September 2016 by lberuti

CMA CMG was introduced in the iTraxx Crossover (ITXEX) index for the first time in March this year. It was one of the new entrants in the series 25. Since then, it has never been the darling of the credit market. While the 5 year risk premium of ITXEX25 barely moved since its launch (it went from 296bps to 310bps), the 5 year CDS of CMA CGM went from 965bps to 1363bps at the close tonight. Insuring $1m of debt for 5 years costs you 26cts upfront (and a quarterly premium of 1.25cts afterwards), that is up 1ct compared with yesterday. Indeed, CMA CGM is reporting tonight and investors’ nerves are tested by Hanjin Shiping Co, the distressed Korean container mover which filed for court protection on Wednesday. Even if CMA CGM published a notice to its customers saying that their exposure to Hanjin is limited (they work together on 5 out of 200 shipping lines), the Korean company sent a stern reminder that the industry is experiencing extreme difficulties to recover from the slump that has plagued it since the global financial crisis.