Again we have a nice update from Bespoke Invest on the state of sovereign credits, as measured by the Credit Default Swaps (CDS), as worries over Greece has recently resurfaced.
In contrast to the last episode where markets reacted violently on concerns over Greece's credit standings, today's second round of the Greek drama has seen the markets seemingly discounting the issue or has insulated the problem.
According to Bespoke, ``New concerns over Greece have caused sovereign debt default risk for the country to spike to its highest level of the crisis. But while the last spike in January caused global equity markets to pull back, this time investors (especially in the US) don't seem too worried about it. To quote the phrase that former President George Bush struggled so much with, "Fool me once, shame on you. Fool me twice, shame on me." (emphasis added)
Here are some possible reasons: the markets realizes that a resolution of the Greek dilemma is at hand (and current spike is a temporal issue), contagion risks from Greece may have been exaggerated, the markets are increasingly jaded or hackneyed over the issue and or lastly, inflationism has eclipsed other issues or has transitioned to be the most dominant theme.
In contrast to the last episode where markets reacted violently on concerns over Greece's credit standings, today's second round of the Greek drama has seen the markets seemingly discounting the issue or has insulated the problem.
According to Bespoke, ``New concerns over Greece have caused sovereign debt default risk for the country to spike to its highest level of the crisis. But while the last spike in January caused global equity markets to pull back, this time investors (especially in the US) don't seem too worried about it. To quote the phrase that former President George Bush struggled so much with, "Fool me once, shame on you. Fool me twice, shame on me." (emphasis added)
Here are some possible reasons: the markets realizes that a resolution of the Greek dilemma is at hand (and current spike is a temporal issue), contagion risks from Greece may have been exaggerated, the markets are increasingly jaded or hackneyed over the issue and or lastly, inflationism has eclipsed other issues or has transitioned to be the most dominant theme.
As shown above the Greece problem is largely isolated.Only four countries have seen increases in the cost of insuring debt: aside from Greece, from a reference point of February 2010, only Chile (perhaps due to the recent earthquake), Vietnam and Egypt.
Nevertheless, relative comparisons are dependent on "reference point" used, where a biased conclusion can be arrived at.
For me, the best part of the table above is to use the start of the 2008 or the last column as reference, as 2008 was the culmination of the bear markets via a collapse in October.
From that point we see emerging markets as Kazakhstan, Turkey, Brazil, Colombia, Peru, Indonesia and the Philippines as the 'best performers' considering that the respective CDS prices have only had marginal increases compared to the rest which has seen CDS rates more than doubled.
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