Changes in Sovereign Debt Default Risk Over the Last Month

Includes: ERO, EU
by: Bespoke Investment Group

European countries have had their fair share of problems recently, and it shows in their 5-year CDS (credit default swap) prices. Below is a table showing the one-month change in default risk (5-year CDS) for nearly 60 countries. (G-7 countries are highlighted in yellow, although we do not have pricing info for Canada). As shown, 12 European countries top the list in terms of increases in default risk over the last month. Denmark default risk has spiked the most at 67%, followed by Italy (59%), the Netherlands (41%), Norway (36%), and Finland (35%). Germany and France -- which still have low CDS prices relative to the rest of the world -- have spiked 30.24% and 27.24% respectively over the last month.

While debt ceiling talks have dominated the financial news flow here in the U.S. over the last month, default risk for the U.S. has barely budged. Five-year CDS for U.S. sovereign debt has gone from 53.14 basis points to 55.76 basis points since June 16th, which is a change of 4.93%. So far the ratings agencies and their threats of downgrade have yet to frighten traders too much.