Credit Default Risk Update: Bond Vigilantes Around the Corner

An updated list of credit default swap (CDS) prices and changes to default risk based on 38 countries courtesy of Bespoke Invest.

In general, sovereign default rates have been higher.

But the biggest the surge in default risks on a year to date basis have been in European countries, particularly in Ireland which jumped 58%, Belgium 53%, Spain 52% and Portugal 51%.

And the banking based financial turmoil has weighed heavily even on its major European economies as Germany, UK and France.

The regional pecking order of default concerns appears to be: Europe, Latin America and Asia.

Fortunately, the Philippines have so far had inconsequential changes.

Perhaps recent success of its latest bond offering which had been well received was reflected by such the seeming equanimity of CDS spreads (see see Philippines Secures Funding Requirements; Return Of The Bond Vigilantes?).

The following is the table of CDS prices…

In terms of CDS prices, according to Bespoke, ``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.”

As far as we are concerned, the Bond vigilantes seem to be lurking around the corner.