Treasury Auction Addendum: Sovereign Credit Continues to Improve

Credit protection on the US sovereign continues to improve in tandem with the banks. We had been out to +75; now we are back to LIBOR +27 for five-year credit protection on the US sovereign.

The risk to the credit of the US Treasury comes from the link to the banking system, and as long as the frame holds (and the Fed doesn’t have to take hundreds of billions of dollars of losses on its multi-trillion-dollar portfolio, all will appear well. All isn’t well, to be sure; not since Alexander Hamilton funded the public debt in the 1790s has the credit of the US been at this kind of risk. But the frame is likely to hold, which means that the credit of the US will hold, along with the Treasury market.

From Markit Partners:

G7 Industrialised Countries CDS

Ticker CLIP Name 5Y Today Daily Chg (bp) Weekly Chg (bp) 28 Day Chg (bp) USGB 9A3AAA Utd Sts Amer 27 -8 -9 -20 JAPAN 4B818G Japan 57 -10 -13 -21 DBR 3AB549 Fed Rep Germany 25 -9 -13 -19 UKIN 9A17DE Utd Kdom Gt Britn & Nthn Irlnd 71 -11 -26 -23 FRTR 3I68EE French Rep 27 -8 -16 -19 ITALY 4AB951 Rep Italy 78 -13 -29 -41

Comments

[Prudent Man CFA]

No mention of the failed auction in England and the close call in the U.S. that sent a BHO mission to Saudi for help.

Beauty is in the eye of the beholder.

2009 May 10 01:15 PM