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.