By Bondsquawk:
European Soverign CDS continues to trade worse the last couple of days with all the gains from the Monday announcement of the Greece rescue package evaporated. At its recent peak, Greece 5yr CDS was trading around 440 bps which subsequently recovered to about 375 bps after details of the European aid was released. It is currently trading around 430 bps. The higher the premium, the higher the market’s perception of a default.
Separately, there appears to be some contagion with Portugal and Spain CDS both spiking on fears that these countries are next in line after Greece. Here is where they are most recently quoted:
| CDS | 5YR | 10YR | 5Y1D | 5Y1W |
| —————— | ———— | ———- | —— | —— |
| AUSTRIA (100) | 57/61 | 62/66 | 2 | -2 |
| BELGIUM (25) | 59/63 | 64/68 | 2 | -1 |
| DENMARK (25) | 34/38 | 39/43 | 1 | 1 |
| FINLAND (25) | 25/28 | 28/32 | 1 | 2 |
| FRANCE (25) | 52/55 | 57/61 | 3 | -1 |
| GERMANY (25) | 32/34 | 36/39 | 2 | 1 |
| GREECE (100) | 420/440 | 360/390 | 0 | -10 |
| IRELAND (100) | 149/155 | 152/162 | 0 | -14 |
| ITALY (100) | 126/136 | 131/141 | 1 | -3 |
| NETHERLANDS (25) | 34/38 | 38/43 | 0 | 0 |
| NORWAY (25) | 15/19 | 18/22 | 0 | -1 |
| PORTUGAL (100) | 190/200 | 180/200 | 15 | 25 |
| SPAIN (100) | 146/156 | 140/160 | 10 | 14 |
| SWEDEN (100) | 32/36 | 35/39 | 0 | -2 |
| UK (100) | 73/77 | 77/81 | 1 | -3 |
| USA (25) | 35/41 | 39/45 | 0 | -4 |
The unfortunate thing about credit problems are that they never seem to go away….unless you fix the underlying issues (balance sheet, spending, revenue) every other solution is akin to using band aid’s to heal a severed limb.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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