Preliminary results of today’s auction on credit default swaps (CDS) on defaulted Greek debt indicate that CDS holders will receive 78.25 eurocents for each euro of face value. The auction has set the fair value of the CDS and will use that price to settle the swaps. The final results are due at 11:30 ET, but there is no expectation that the payout rate will change significantly.
Based on the expected number of CDS included in the auction, the total payout is projected to be around $2.5 billion, which is about what was expected and, in the grand scheme of things, not very much. The more important issue, at least from the point of view of CDS traders, is that the market for CDS has been preserved.