Back in October, i asked about a Turkish Bond and Credit Default Swap Trade. The CDS basis then was wider then 300bp. its now around 100bp (it was that wide in the beginning of October that it was that wide and in a very short time the basis contracted). To those that helped me with that trade, thank you very much. I have another question now to those of you that are familiar with default swaps and asset swaps.....The Motorola 6.75% of 02/01/2006 yields around 5.65%. its a callable issue but it aint going to be called. In an asset swap the pricing I got was 296.1bpI looked at where a Default Swap would price on this particular bond, the price I got was 132.3bp. Now, if the traders I got these prices from actually give me these levels, how can I profit from this? I looked at 20 other corporates on a bloomberg and in most cases the Asset swap spread and Default Swap spread were within 50bp of one another. Thanks in advance and to all a happy christmas and new year. please respond soon.

CCD, you can profit from a long basis trade, buy the asset swap and buy the Default Swap, so if you can get both the positions at those quotes, you can pocket 160+ bps per year. From the trend of this year, 160 bps basis is very high, it will almost surely revert to the average (around 50 bps). Since the credit spread tighten so much recently, it should start widen again, so you might want to overhedge a little bit by buying more CDS say 1.2:1.