The World’s Safest Sovereign Debt

Posted on March 25, 2009 by jck

Implied Ratings are calculated using a proprietary model developed by CMA and fed with CDS pricing data
from CMA DataVision.

Source: CMA DataVision Global Sovereign Credit Risk Report Q1-2009

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12 Responses to The World’s Safest Sovereign Debt

  1. Amateur? says:
    July 1, 2009 at 3:56 pm

    I haven’t done this stuff but I would look first a state’s ability to collect further income when needed. The USA can print more money if they are not afraid of inflation. Norway can sell more oil, which doesn’t cause inflation. Oil is thus better than a printing machine.

    Australians already have some private debt which limits government’s ability to increase taxes, if a financial meltdown hits it. Current account is negative. It is an exporter of commodities (but not oil), thus a global meltdown would hit her hard.

  2. -jck says:
    March 27, 2009 at 2:45 pm

    I am also very surprised at the Aussie position.

  3. Steve L says:
    March 27, 2009 at 2:32 pm

    Thanks! 14th surprises me for a nation with a pre-funded retirement system, natural wealth in commodities, easily defensible borders and a relatively corruption-free legal system – but I’m too enamored with my book, I guess. Still, the same as the UK?

  4. -jck says:
    March 27, 2009 at 2:32 am

    Australia is at 14th, same rating as the UK
    No CDS market for Canada for now, so no implied rating.

  5. Steve L says:
    March 27, 2009 at 2:08 am

    Ouch! Where’d Australia and Canada come out?

  6. -jck says:
    March 26, 2009 at 11:43 am

    If we were to go only by the hazard rate that’s definitely not AAA, clear, but implied ratings should be derived from expected losses, not just hazard rates, so with a high recovery rate it could be AAA.
    this is a CMA proprietary model, so I don’t know exactly how the rating is derived.

  7. Mahalanobis says:
    March 26, 2009 at 10:38 am

    So how does this then justify a AAA rating? Higher recovery rate?

  8. -jck says:
    March 26, 2009 at 10:06 am

    Yep, they are in %, i.e the probability of sovereign default occurring at any time over a 5 year period.
    NOT an annual hazard rate, that would be around 1.1% for the U.S.

  9. Mahalanobis says:
    March 26, 2009 at 8:50 am

    Are you sure CPDs are stated in per cent (way too high) and not in bps (bit low?)?

  10. -jck says:
    March 26, 2009 at 7:42 am

    the UK is 13th, implied rating AA+

  11. AJ says:
    March 26, 2009 at 2:07 am

    where is UK ? not even AA+ ?

  12. anon says:
    March 25, 2009 at 2:57 pm

    sovereign cds: the greatest ponzi scheme nobody wants to acknowledge

    think about it…the stuff trades a lot…but if you’re left holding the bad, you get nothing.

    that is not a way to hedge. that is a way to scam.