The World’s Safest Sovereign Debt
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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March 25th, 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.
March 26th, 2009 at 2:07 am
where is UK ? not even AA+ ?
March 26th, 2009 at 7:42 am
the UK is 13th, implied rating AA+
March 26th, 2009 at 8:50 am
Are you sure CPDs are stated in per cent (way too high) and not in bps (bit low?)?
March 26th, 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.
March 26th, 2009 at 10:38 am
So how does this then justify a AAA rating? Higher recovery rate?
March 26th, 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.
March 27th, 2009 at 2:08 am
Ouch! Where’d Australia and Canada come out?
March 27th, 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.
March 27th, 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?
March 27th, 2009 at 2:45 pm
I am also very surprised at the Aussie position.
July 1st, 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.