Credit default swap (CDS) protection buying against sovereign debt default has spiked to five times the level of similar protection bought for corporate bonds, as the potential for a wave of sovereign debt defaults intensifies.
CDS notional amounts for 54 governments around the world jumped 14.2% since October 9th 2009 according to Depository Trust & Clearing Corp.
Outstanding CDS amounts for all other kinds of debt only rose 2.6% over the same period.
Demand for default protection has been particularly strong for Europe's fiscally disastrous nations:
Bloomberg: European countries led the jump, with the amount of protection on Portugal rising 23 percent, Spain 16 percent and Greece 5 percent.
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The cost to protect against a default by Greece has more than doubled to 325 basis points since Sept. 30 as the government struggles to reduce a budget deficit that’s 12.7 percent of gross domestic product, CMA DataVision prices show.
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