Country Default Risk

Yesterday we highlighted credit default swap prices for major banks and brokers around the world.  Below we provide the same default risk levels for individual countries.  These prices represent the cost per year to insure $10,000 of debt for five years.  We also show what the prices were at the start of the year. 

Of the G-8 countries, Russia has by far the highest default risk with a CDS price of $523.  That's higher than any of the struggling banks we highlighted yesterday. 

Japan, France, the US, and Germany have the lowest default risk of the group of countries, but they have all spiked more than 200% this year.  Argentina is in the most trouble, with a cost of $4,453 per year to insure just $10,000 of debt.  Venezuela is the second worst at $2,016, followed by Lebanon, Egypt and Indonesia.

Comments

[Dividend Gr...:]

Interesting chart showing increasing risk for some former high flying emerging markets..

2008 Nov 07 10:05 AM

[Consider_this:]

One scenario that didn't seem possible before all these crisis started seems to yell out from this chart now.

What happens if all the govt defaults?

It doesn't even have to be "all countries" to cause the govt-credit market to seize up in general.

All the countries look terrible now, so this is not that far fetched.

Plus, with global trade linking economies know, As each country fails, it'll pull it's economic neighbor, whether trading partner, creditor, partner or what not, down.

This has never happened before, so I *am* describing a black swan event.

But consider the consequence if it does happen. I can't begin to fathom this bottomless pit.

Forget gold or silver, if this happens, we're talking about military might being the ultimate valuation/currency of any country. i.e. 1 unit of firepower = 1 bag of rice or something like that. Exactly what was used during cavemen periods.

What have we done!

2008 Nov 07 10:14 AM

[Crank Monkey:]

Civilization is not the default setting.

2008 Nov 07 10:29 AM

[billp37:]

"If counterparties pay up, CDSs are a zero-sum game: what the seller loses, the buyer gains."

www.economist.com/fina...

Big "if"?

2008 Nov 08 09:19 AM

[Boubou:]

Leap2020 makes a good case for US default in mid 2009.

2008 Nov 08 11:04 AM

[notsosmart:]

this is not news.how manytimes has russia defaulted since ww1? someone smarter than me can figure this out & transpose into current $ value.the last one owning this worthless paper is the loser.a lotof the dumb sheeples will have to try & sell their granite counters for bread while "mission accomplished" makes out his pardon list for the cronies that helped create this lunacy.we just got rid of our congressman but most of th dumb-dumbs reelected theirs.it looks like in alaska they reelected a felon senator.keep getting fleeced.

2008 Nov 08 12:09 PM

[bill d:]

The "sheepies" in Alaska can't be too dumb - the money they get comes from the rest of us.

2008 Nov 08 03:54 PM

[noworriez:]

I would like to have seen how Canada fared - It is missing from the list

2008 Nov 10 08:47 AM

[Jaime Chave...:]

For this articol to be complete you shoud price the credit default swap for
the likely counterparts covering sovereing defaults.With AIG practiclly gone
it makes very litle sense to make that type of cost analysis.

2008 Nov 11 02:13 AM

[Kunst:]

What does default mean when you can print as much money as you want, and your debt is in your own currency?

2008 Nov 13 01:04 AM

[ignorant:]

Canada is #1 ahead of all other countries. Canada is ahead of all other countries because the banking system and housing market are in much better shape than other countries. Perhaps someone should inform the author that Canada is a country. My information for Canada credit default swaps comes from the chief economist of TD Securities. Maybe we should follow Canada as a model for our financial regulatory policies.

2008 Nov 14 12:10 PM