Credit-Default Swaps Make a Comeback

Just one year after the bankruptcy of Lehman Brothers sent shockwaves through the U.S. financial system, some of the products that helped bring the firm down, credit-default swaps, have lost their meltdown stigma. While we slog through the slowest recession rebound since 1945, market confidence for credit-default swaps is at its highest level since June 2008, and is contributing to growing confidence in the overall credit market. (CDS provide investors protection against default and the chance to speculate on corporate debt.) One analyst explains to Bloomberg that Lehman’s failure had repercussions that “were astronomical, broadly speaking, but the CDS market worked well” at bouncing back.