GMAC 1 year versus 5 year CDS spread....look at the attached chartsHello,I very much wonder what is going on in the GMAC CDS market - one year protection currently at 538 bp is trading higher than 5 year protection at 462!!! - in my view the 5 year should always trade higher than 1 year protection right? currently you are not (or even negatively) compensated for taking the risk that the situation gets worth if you sell 5 year protection I think.. 5 year CDS were over 1 year CDS by 205 bp on average in the period 11/04 to 11/05 - since last week 1 year GMAC protection shot up from 200 bp to 538 and I wonder what sence this makes compare to the 462 you get payed for 5 year protectionprices imply that it is twice as possible that GMAC is going to file for bankruptcy withing the next 12 month since a week ago - are there any technical factors in play?in my calculation where I assume a 30 bond price at the time of default and 20 % of swap credit spead to compensate for spread change risk, capital employed, trading costs, liquidity... this would mean the market implied default problability is appr. 6,5% but I am not sure if I did the calculation right - any feedback would be very much appreciatedall the bestg.

GM maybeGMAC no -- at worst, they can spin GMAC off.

why not? do you think it is for certain that they will spin GMAC off...

GM Woes Fuel Speculation: Could GMAC be cut loose for cash?

From the last investor conference: Wagner - Sale of GMAC far from certainwho does he think he's actually fooling? Is GM credit still trading with an upfront?

The spread on GMAC is going to be a function of the likelihood of the spinoff from GM i.e. 0 likelihood means GMAC spread equals GM, 100% likelihood GMAC spread will trade around 100bps or so. you have to consider a couple of things here. whether gm will sell rescap first and if they do what does that mean for gmac sale and also the recovery rate on gmac if it does file. since it's a financial company the recovery is likely to be higher than the one on gm.

The spread on GMAC is going to be a function of the likelihood of the spinoff from GM i.e. 0 likelihood means GMAC spread equals GM, 100% likelihood GMAC spread will trade around 100bps or so. you have to consider a couple of things here. whether gm will sell rescap first and if they do what does that mean for gmac sale and also the recovery rate on gmac if it does file. since it's a financial company the recovery is likely to be higher than the one on gm.

attached is a GM bankruptcy calculator (found on WSJ website)any views for the inputs?gl