While ISDA finally legitimized the use of CDS as a hedging tool with the news on Friday, it wasn’t until the CAC was triggered. Thus, there was still the possibility that bondholders would have suffered a huge capital loss without a CDS payment in return if ISDA considered the debt swap ‘voluntary’ even at the point of a gun. Conclusion: still be careful with sovereign CDS. With Greece put to rest for the time being, eyes look to Portugal and while bonds are higher/yields lower today, CDS is wider to the most in 5 weeks. In Asia, China exports in Feb rose much less than expected while imports grew more than estimated but we need to look at Jan and Feb together because of the distortion of the Chinese New Yr. Doing so still saw a trade deficit with exports over the two months up 6.8% y/o/y and imports up by 8.5% y/o/y. In response, the yuan closed at a 6 week low vs the US$. In somewhat dated data, India’s Jan IP rose 6.8% vs expectations of 2.1% and Japan’s Jan machinery orders were also a touch better than forecasted. Key in the US this week will be tomorrow’s FOMC meeting and inflation data Thurs and Friday.

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