Headlines
Trading on protection against UK defaults jumped in Q1, says ISDA
Published by Global Banking & Finance Review®
Posted on July 1, 2025
2 min readLast updated: January 23, 2026
Quick Summary
UK default protection trading soared to $2 trillion in Q1 2025, driven by trade tensions and tariff uncertainties affecting global markets.
Surge in UK Default Protection Trading Reaches $2 Trillion in Q1 2025
By Nell Mackenzie
LONDON (Reuters) -Trading of derivatives contracts that provide investors with protection against UK company defaults jumped almost 50% in the first quarter of 2025 to more than $2 trillion, an International Swaps and Derivatives Association report showed on Tuesday.
WHY IT’S IMPORTANT
Credit default swaps trading reported in the UK rose by 47% to $2.3 trillion, from $1.5 trillion in the first quarter of 2024, trade body ISDA reported.
The volume of insurance protection investors took out on UK corporate bonds in the first quarter illustrates the scale of unease ahead of U.S. President Donald Trump's announcement of sweeping import tariffs on April 2.
While a UK/U.S. trade deal has since been signed, tariff uncertainty is a headwind for corporates globally as a July 9 U.S. deadline for other countries to strike deals looms.
The effective U.S. tariff rate based on announced policies has climbed to 13% from 3% at the start of the year, Goldman Sachs analysts said last week.
Even if some of the harshest levies are rolled back, higher effective tariffs this year could still drive up inflation and cut into company profits and consumer spending.
KEY QUOTE
"Single-name CDS activity was particularly prevalent in the UK, making up 98% of European traded notional, compared to 2% in the EU," the ISDA report said.
This week, trade tensions topped a list of investor concerns alongside deepening worries over a potential global recession, a Bank of America investor survey showed on Monday.
BY THE NUMBERS
Notional European CDS trading rose 28% to $3 trillion in the first quarter compared to $2.3 trillion in the first quarter of 2024, driven by heightened activity in index CDS, ISDA said.
UK-reported trades represented roughly 75% of total European CDS notional trading, and almost 82% of the total trade count, while the EU accounted for around 25% and 18%, respectively, the report said.
GRAPHIC
(Reporting by Nell Mackenzie. Editing by Dhara Ranasinghe and Mark Potter)
Key Takeaways
- •UK default protection trading surged 50% in Q1 2025.
- •Credit default swaps in the UK reached $2.3 trillion.
- •Trade tensions and tariffs impact investor sentiment.
- •UK trades dominate European CDS market.
- •Global recession fears influence trading activity.
Frequently Asked Questions about Trading on protection against UK defaults jumped in Q1, says ISDA
1What was the percentage increase in UK credit default swaps trading?
Credit default swaps trading in the UK rose by 47% to $2.3 trillion in the first quarter of 2025, up from $1.5 trillion in the same period of 2024.
2What factors are contributing to investor unease in the UK?
Investor unease is illustrated by the volume of insurance protection taken out on UK corporate bonds, driven by concerns over trade tensions and a potential global recession.
3How does the UK CDS trading volume compare to the EU?
UK-reported trades accounted for roughly 75% of total European CDS notional trading, significantly higher than the EU's 25% share.
4What impact could higher tariffs have on the economy?
Higher effective tariffs this year could drive up inflation and negatively affect company profits and consumer spending, according to analysts.
5What was the total notional European CDS trading volume in Q1 2025?
Notional European CDS trading rose to $3 trillion in the first quarter of 2025, up from $2.3 trillion in the same period of 2024.
