Lynn Strongin Dodds looks at the trends and developments of CDS trading across the US, EU and UK in ISDA’s Q1 report card.
Credit default swap (CDS) trading volumes soared to record levels, reflecting an escalation in concerns over corporate defaults amid geopolitical and economic turbulence, according to the International Swaps and Derivatives Association’s (ISDA) Q1 report on credit derivatives trading across the European Union (EU), UK and US.
On the big picture front, the report showed the combined traded notional for these regions peaked at $8.5 trn, a significant jump from $5.3 trn in Q1 2024. The US accounted for the largest share of CDS trading with 64.8%, followed by the UK, 26.5% and the EU, 8.6%.
In number terms, the US market experienced a substantial increase in CDS traded notional, rising by 89.5% to $5.5 trn. The UK saw a 47% hike to $2.3 trn year over the same period in 2024. The rise was driven almost entirely by single-name CDS contracts, which protect against defaults by specific companies. These instruments accounted for a hefty 98% of European CDS notional trading, with UK trades alone comprising the biggest chunk at 75% of the total European market.
Meanwhile European CDS trading, as measured by notional, was $3 trn in the first three months, up 28% from $2.3 trn in Q1 2024. The growth was attributed to the 69.8% surge in single names to $328.8 bn from $193.6 bn while index trading was 24.2% higher reaching $2.7 trn from $2.2 trn during the timeframe.
The analysis is based on transactions publicly reported by 17 European approved publication arrangements (APAs) and trading venues (TVs). US trading data includes index credit derivatives transactions reported to the Depository Trust & Clearing Corp’s (DTCC) swap data repository (SDR) under the Commodity Futures Trading Commission (CFTC) regulations and security-based credit derivatives reported to DTCC’s security-based swap data repository (SBSDR) and ICE Trade Vault under Securities and Exchange Commission (SEC) requirements.
The spike in activity coincided with US President Donald Trump’s Liberation Day tariffs announced April 2, 2025, which imposed a 10% baseline universal duty on all imports, plus additional, “reciprocal” tariffs for specific countries deemed to have the greatest trade deficits with the US. Although the President quickly pushed a 90 day pause button, research from Goldman Sachs said the threat of tariffs created headwinds for global corporations, raising inflation pressures and lowering growth forecasts.
At the time of its report in April, Goldman Sachs suggested that the current trade tensions between the US and the EU posed a downside risk to the bloc’s economic growth projections for 2025 and 2026, which were 0.8% and 1.1% respectively. According to the report, the risk of inflation expectations not meeting forecasts for 2026 were more balanced, which could lead to a downward revision of the European Central Bank’s terminal interest rate target of 1.75% to 1.5%.
Fast forward to today and the EU and UK have struck trade deals with the US. The EU now faces a 15% single tariff rate on most EU exports. The rate is lower than the original 30% that Washington threatened to impose on the bloc from August 1.
The UK’s single tariff rate is lower at 10% and the country also secured a zero-tariff deal on steel and aluminium based on a quota. Despite these deals, uncertainty remains, and economic growth projections are subdued as stated in the recent E&Y UK GDP Forecast. https://www.ey.com/en_uk/newsroom/2025/07/uk-gdp-forecast-upgraded-amid-global-uncertainty
Against this backdrop, CDS should continue to prove popular as a way to mitigate risks from default. Earlier in the year, ISDA SwapInfo added European information to create a more comprehensive picture of derivatives trading. The first report, published in March 2025, looked at all three jurisdictions’ from the second half of 2021 – when the dataset first became available – through to the second half of 2024.
Analysis of the data in the report revealed that 70% to 80% of CDS traded notional in Europe was reported in the UK, with the EU accounting for 20% to 30%. Globally, the UK represented about 30% of total CDS trading, while the EU comprised approximately 10%, and the US accounted for 50% to 60%. Notably, index CDS constituted over 90% of credit derivatives traded notional reported in Europe, while single-name CDS represented less than 10%.
