Covid-19: CDS spreads of Indian firms widen amid economic uncertainties

The credit default swaps (CDS) of Indian firms, mostly banks, have increased in the thinly traded markets overseas.
 

CDS is a form of an insurance that investors buy to protect their investments in bonds.
 

The increase in CDS spreads indicates an increasing risk of default, but not necessarily that bond investors would default.
 

India has very few issuers of overseas bonds. In comparison, almost every other country has many more overseas bonds.

Spreads on all CDS instruments have increased after the Covid-19 pandemic, as recession fears loom large.
 

A point to note here is that CDS spreads have widened