U.S. Treasury Default Swaps: New Record
The big move was on the 10 year, 5 year unchanged.
“The market is starting to look at the senior debt of the GSEs as approaching full-faith-and-credit obligations of the U.S. government,” said Ken Hackel, managing director of fixed-income strategy at RBS Greenwich Capital in Greenwich, Connecticut. “That is a large book of debt to effectively transfer to the U.S. balance sheet and increase the government’s liability.”
According to Bloomberg and CMA DataVision:
The cost of protecting against losses on Treasuries soared to a record on concern that the U.S. government faces higher liabilities with its support for Fannie Mae and Freddie Mac, credit-default swaps show.
Contracts on U.S. government debt increased 2 basis points to 22 basis points at the close of trading in London, according to CMA Datavision, after earlier reaching as high as 24. The 10- year contracts exceeded a previous record of 20 basis points yesterday. Five-year contracts were unchanged at 16 basis points.
In normal times, the spread is less than 2 basis points.
U.S. Treasury Credit-Default Swaps Increase to Record, CMA Says