Some arbitrageurs are taking advantage of an inversion in the credit default swap curve for US banks in a bet that they can make a profit and remain hedged against any debt defaults.

Typically, the cost of credit default swaps over one year is cheaper than over five years, creating a steepness in the CDS curve. But in times of distress as is currently the case, that curve can invert, pushing CDS spreads wider in the short end.