CMA today released its Global Sovereign Debt Credit Risk Report for the 3rd Quarter of 2011, in which it names the top ten most and least risky sovereigns as well as the best and worst performers.
In an extremely volatile quarter, the credit markets saw a significant rise in the cost of protection across all regions. The market responded to downgrades by rating agencies in the US, Japan and Italy, a slow down of growth in China and Eurozone debt concerns affecting the broader region. Key highlights include:
▪ The cost of debt protection in the United States remained relatively stable throughout the quarter, despite the downgrade which threw global equity markets into turmoil in August.
▪ Greece remains the most risky sovereign debt as the market prices in an almost certain default event.
▪ Scandinavian countries saw a significant widening as the size of the fund required to stabilise the Eurozone escalated.
▪ Norway remains the least risky region by just 1 bp, as the cost of protection rises to 55bp from 21bp.
▪ Emerging markets spreads see a gradual widening of spreads this quarter as the market takes profit and reduces risk in the region. Spreads in China spike on the last day of the quarter.
▪ Australia and New Zealand widen to the end of the quarter as metal prices collapse.
