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I just came across this en route to looking up something else and thought iTulip people might find it interesting. I thought it notable that three countries have a greater than 50% chance of sovereign debt default. EJ has mentioned such an event as a possible trigger for another crisis.
(Rounding off to assume a 50% chance of each of three countries defaulting, what are the odds that NO country will default- 1 in 8? Chances of at least one defaulting- 7 in 8? Chances of 2 defaulting- 3 in 8?)
I also thought it notable to read how well rated the U.S. is. Though I suppose such ratings are not concerned with the U.S. getting out from under the debt via inflation? (I don't know what I'm talking about, I'm just musing.) Discussion welcomed.
Ukraine is world's riskiest sovereign debt - CMA
Friday October 02, 2009 02:51:11 AM GMT
SOVEREIGN-DEBT
LONDON, Oct 1 (Reuters) - Ukraine's sovereign debt is the world's riskiest, judging by debt insurance costs which show a 54 percent probability of default over the next five years, credit default swaps monitor CMA DataVision said on Thursday.
Ukraine's debt is even riskier than that of Argentina, which caused the world's biggest sovereign default in 2002.
Ukraine's five-year credit default swaps, a derivative instrument designed to insure against restructuring or default of debt, are quoted at a mid-price of 1,200 basis points, CMA said in a report.
This means it costs $1.2 million a year for five years to insure $10 million of debt. A CDS price above 1,000 bps indicates distressed debt.
CMA is a credit default swap pricing service which collates intraday data on CDS prices from 30 firms.
Ukraine is rated at junk status by ratings agencies Moody's, Standard & Poor's and Fitch.
Ukraine's economy is deep in recession, its currency has lost close to 40 percent against the dollar this year and deep rifts between the country's political elite hamper any chances of meaningful reform, especially with elections looming early in 2010.
The country is more or less dependant on a $16 billion loan from the International Monetary Fund.
And on Wednesday, state-owned firm Naftogaz failed to pay out on a $500 million Eurobond, although ratings agency Fitch says this does not constitute a sovereign default. [ID:nWNA0962]
CMA's report found Argentina, which is hoping to restructure some $20 billion in defaulted bonds, to be the second most risky market after Ukraine, with five-year CDS prices around 1,125 bps and a five-year default probability of 52 percent.
Investors still have memories of the country's 2001-2002 default on almost $100 billion in debt.
Venezuela is the world's third-riskiest market with CDS at 935 bps, and a 51 percent default probability.
Norway has the world's safest sovereign debt, CMA said. Its 5-year CDS prices are around 16.9 bps, indicating a 1.5 percent probability of default over five years. Finland is second at 20.7 bps and the United States third at 21.
(Reporting by Carolyn Cohn; Editing by Ron Askew)"
I just came across this en route to looking up something else and thought iTulip people might find it interesting. I thought it notable that three countries have a greater than 50% chance of sovereign debt default. EJ has mentioned such an event as a possible trigger for another crisis.
(Rounding off to assume a 50% chance of each of three countries defaulting, what are the odds that NO country will default- 1 in 8? Chances of at least one defaulting- 7 in 8? Chances of 2 defaulting- 3 in 8?)
I also thought it notable to read how well rated the U.S. is. Though I suppose such ratings are not concerned with the U.S. getting out from under the debt via inflation? (I don't know what I'm talking about, I'm just musing.) Discussion welcomed.
Ukraine is world's riskiest sovereign debt - CMA
Friday October 02, 2009 02:51:11 AM GMT
SOVEREIGN-DEBTLONDON, Oct 1 (Reuters) - Ukraine's sovereign debt is the world's riskiest, judging by debt insurance costs which show a 54 percent probability of default over the next five years, credit default swaps monitor CMA DataVision said on Thursday.
Ukraine's debt is even riskier than that of Argentina, which caused the world's biggest sovereign default in 2002.
Ukraine's five-year credit default swaps, a derivative instrument designed to insure against restructuring or default of debt, are quoted at a mid-price of 1,200 basis points, CMA said in a report.
This means it costs $1.2 million a year for five years to insure $10 million of debt. A CDS price above 1,000 bps indicates distressed debt.
CMA is a credit default swap pricing service which collates intraday data on CDS prices from 30 firms.
Ukraine is rated at junk status by ratings agencies Moody's, Standard & Poor's and Fitch.
Ukraine's economy is deep in recession, its currency has lost close to 40 percent against the dollar this year
The country is more or less dependant on a $16 billion loan from the International Monetary Fund.
And on Wednesday, state-owned firm Naftogaz failed to pay out on a $500 million Eurobond, although ratings agency Fitch says this does not constitute a sovereign default. [ID:nWNA0962]
CMA's report found Argentina, which is hoping to restructure some $20 billion in defaulted bonds, to be the second most risky market after Ukraine, with five-year CDS prices around 1,125 bps and a five-year default probability of 52 percent.
Investors still have memories of the country's 2001-2002 default on almost $100 billion in debt.
Venezuela is the world's third-riskiest market with CDS at 935 bps, and a 51 percent default probability.
Norway has the world's safest sovereign debt, CMA said. Its 5-year CDS prices are around 16.9 bps, indicating a 1.5 percent probability of default over five years. Finland is second at 20.7 bps and the United States third at 21.
(Reporting by Carolyn Cohn; Editing by Ron Askew)"