U.K. CDS Breaks the 100 Barrier
The level of borrowing with which governments around the world are saddling themselves sent the prices paid on government debt CDS higher, in some cases sharply.
U.K. 5yr: 106 bp
Italy: 5yr: 161 bp
US 10yr: 66 bp
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December 2nd, 2008 at 1:49 pm
Rational, but ugly… wonder which national government buys the farm first. I would expect a weak Eurozone country — they don’t have as many options as the US because they don’t control their own currency.
December 2nd, 2008 at 2:09 pm
Of the big ones Italy is the one to watch, but Ireland is my best guess for the first to blow up, if blow ups come to pass…the Euro would already have converged with the Argentine peso without the $400 bn + in swap lines, courtesy of the fed.
December 2nd, 2008 at 6:57 pm
What is the farm? The banking system?
December 3rd, 2008 at 3:23 pm
I think so much trading in CDSs has nothing to do with the ‘D’ in the acronym, that one must be careful not to get too dramatic about it. For so many traders it is simply the most convenient method of entering a short position, not at all a hedge against default.