Weekend Developments

  • ISDA declares Greek use of CACs in restructuring a CDS trigger event
  • Auction will be held on March 19th to determine market payout rate of CDS contracts
  • New Zealand dollar falls as Fonterra cuts milk price target, citing strong NZD

Market movements this morning were relatively restrained following the ISDA’s declaration last Friday that credit default swaps and protection on Greek sovereign debt were triggered. This announcement, coming after weeks of silence from the International Swaps and Derivative Association, the primary organization overseeing market derivatives, was due to the use of CACs in last week’s private sector swaps. Despite the trigger, the ISDA will hold an auction on March 19th, the day before Greece’s scheduled bond payment, determining the payout rate for holders of CDS contracts.

The New Zealand dollar led decliners against the greenback in early trading as Fonterra, the largest dairy collective and one of the largest dairy corporations in the world cut its forecasts for milk prices and export demand, citing the strong New Zealand dollar as causing export concerns. Because dairy and agricultural exports account for a large amount of New Zealand exports, especially to China, a slowdown in Asian demand may put further pressures on the island’s economy. Data shows that dairy accounted for around 25.1% of all 2011 exports, while current YTD data reveals that sector to contribute around 34.9% of goods sold.

As markets move on from Europe, traders will be focusing on the US economy for the coming week, with advance retail sales and the FOMC’s rate decision on March 13th and CPI on Friday March 16th. The European docket will remain relatively light with British labor data and EU zone-wide CPI on March 14th, and the Swiss National Bank’s rate decision on the 15th.

Weekend_03112012-Markets_Look-Past_CDS_Trigger_body_Picture_4.png, Dollar Leads in Early Trading But Markets Look Beyond Greek CDS Trigger

-- By David Liu, DailyFX Research