Country Default Risk Continues to Rise

Below we highlight CDS prices for sovereign debt.  These prices measure the cost of protection against default for 38 countries around the world.  Specifically, the CDS prices represent the cost per year to insure $10,000 worth of sovereign debt for five years. 

As shown, Argentina and Venezuela have the highest default risk, followed by Iceland, Kazakhstan, Russia, and Egypt.  While the UK and US have relatively low default risk compared to most other countries, their CDS prices are getting worrisomely high.  At the start of 2008, it cost about $8 to insure $10,000 of UK and US debt.  It now costs $135 to insure UK debt and $75 to insure US debt.  Japan has the lowest default risk of all of the countries highlighted, followed by Germany and France.

 

We also provide a chart of the year to date percentage change in default risk for the 38 countries.  As shown, default risk has already risen 58% this year for Ireland, 53% for Belgium, 52% for Spain, and 51% for Portugal. 

 

Comments

[BrianSJ]

"At the start of 2008, it cost about $8 to insure $10,000 of UK and US debt. It now costs $135 to insure UK debt"
I don't understand the YTD % change. How does a shift from 8 to 135 come to 27%?

[BrianSJ]

Sorry, worked it out YTD is 2009 - still not used to that.

[A. Howarth]

Not to be a stickler, but how do you not have Canada (G7 member and all) on a list that is inclusive enough to have Belgium and Lebanon?

[David]

Where does Canada fit in? I was expecting to see them near the bottom of the first list with Japan.

[Will G]

What company will be left to pay out this CDS insurance if the US defaults on its debt?

[dj]

Bro's,we are at about same risk as the USA,because they own most of are debt (700 billion)ok we are alittle better but don't tell your usa bud's ,remember when they got upset that lonnie was worth more a green back ,last year::)

[Kosta]

How does Canada fit in? If you've got room for Belgium and Australia, why not include Canada?

[slickvguy]

Why is Canada not included in that list? We are a G7 nation - makes no sense that we are not listed.

[dj]

what's up, you didn't read my post above? We are joined at the hip....don't you guys know that all the Canadian banks have lost there ah ah ah rating :)

[slickvguy]

dj,

It's not that I didn't see it, it's that I don't rely on people who use terms like "bro's" and spell "our" a-r-e.

Canada and the USA do not have the same CDS rates. Unless you can point to PROOF of your assertion, kindly keep your immature and unintelligent slang/ghetto talk to yourself.

[dj]

Ok slick v(value?)guy who is holding almost all of Canadian Gov. debt? Now as for CDS(cdo)have a look at the value of can/usd, now look at the cds rate....so it's really a wash. Now look at dbrs on the six big Canadian Banks ,they no longer have AAA rating! shocking eh!(is "eh" considered ghetto slang?)...As for guys at BIG they consider Canada as just another state of the union

[dj]

......The only problem with CDS is that its not on an exchange and there's no clearing house. They remained unlisted because banks wanted less transparency so they could gouge their customers. It has nothing to do with the instruments themselves.They should be exchange traded like futures contracts, with all the necessary margin and position limits. Its the OTC/ Shadow part of the deal that has the world on the precipice of financial collapse.You just need to move them onto an exchange with a clearing house, like the OCC, period...just wanted to add some value to this thread.

[Alex]

Can you make the tickers that created this sheet available to premium subscribers? It's a useful graph to have on hand and it would take me a while to build it through the Bloomberg. Thanks.

-AA

[Patrick]

Where does this CDS data come from? Bloomberg? Thanks...

[Dragos]

Is there a place where you can track quotes for CDS (of US govt debt)? Thanks.