Credit Default Swaps On USA Debt Via Bloomberg
September 9th, 2008 8:24 am | by John Jansen |U.S. Treasury Credit-Default Swaps Increase to Record, CMA Says
2008-09-09 11:17:19.700 GMT
By Abigail Moses
Sept. 9 (Bloomberg) — The cost of protecting against losses
on Treasuries rose to a record on concern the U.S. government
faces higher liabilities with its rescue of mortgage companies
Fannie Mae and Freddie Mac, credit-default swaps show.
Contracts on U.S. government debt increased 2.5 basis points
to 17 basis points, according to CMA Datavision prices for five-
year credit-default swaps at 12:05 p.m. in London. The 10-year
contracts rose 0.5 basis point to 21.5, CMA prices show.
Credit-default swaps, contracts conceived to protect
bondholders against default, pay the buyer face value in exchange
for the underlying securities or the cash equivalent should a
country or company fail to adhere to its debt agreements. A rise
indicates deterioration in the perception of credit quality; a
decline, the opposite.
Contracts on Treasuries are quoted in euros and a basis
point on a credit-default swap contract protecting 10 million
euros ($14.2 million) of debt from default for five years is
equivalent to 1,000 euros a year.
–Editors: Michael Shanahan, Paul Armstrong
8 Responses to “Credit Default Swaps On USA Debt Via Bloomberg”
By UrbanDigs on Sep 9, 2008 | Reply
how about some personal feelings on this report about this news?
warranted? worthy? scary? a trend?
By Lenny on Sep 9, 2008 | Reply
The thing that always bugs me about CDS on UST’s is exactly who is going to be the counterparty credit that one should trust if UST’s default.
By jck on Sep 9, 2008 | Reply
CDS on UST’s are traded in euros.
By anon on Sep 9, 2008 | Reply
Lenny, I agree completely (and it doesn’t matter what currency they trade in). The joint probability of the U.S. government defaulting AND some big investment bank surviving with the capability to pay off seems not worth the (even miniscule) risk.
That said, I read the Bloomberg article, and the fact that CDS on U.S. Treasuries have become more expensive than those on Japanese government bonds seems bizarre to me. Keep in mind that the Japanese government has a lower credit rating than Botswana (and a debt to GDP ratio more than twice as high as the United States).
By Mukesh on Sep 10, 2008 | Reply
My feeling is that taxpayers will ultimately be responsible. I went into greater detail in this blog entry:
http://blog.moneyaisle.com/2008/09/credit-default-swap-cds-are-taxpayers.html
By gold on Sep 17, 2008 | Reply
gold is the counterpary we should trust if UST defaults.
By Grano on Sep 18, 2008 | Reply
Gold and guns, unfortunately. We’re going somewhere and we’re in a handbasket.
By pay credit report on Dec 11, 2009 | Reply
The positive energy and encouragent we give will return back to us in the same way.