Citigroup’s Credit Derivative Strategist Anindya Basu dropped a 84 page note on US Credit Derivatives after Friday’s close. Readers ought not to feel alone if they think the dog pile is beginning in the wake of Wells Fargo’s utter disaster. As we said in early August:
“And with Buffett unwinding, something must be accumulating a position. One possible suspect is Citigroup. According to a Bloomberg report on Friday, Citigroup, the U.S. bank with the most derivatives, purchased a portfolio of credit-default swaps from retreating rival Credit Suisse Group AG, two people with knowledge of the matter said.”
As if we needed any confirmation that those purchases are being done with cheap credit and not cold-hard cash, there’s this gem from Basu’s note under the title The Turning of the Credit Cycle: Worrying Signs. Nice of them to share it “ex fin”…
To really put your mind at ease consider the face that capital is fleeing the high yield market leaving only a few players controlling the market:
Sleep well, we’re sure Stumpf is.