Thursday, February 4, 2010

US Default Protection Up 200%

It's nowhere near panic levels, but protection against default on debt of the United States government is up over 200% since late 2009.

Zero hedge writes:
Today, US CDS, on which we have been constructive since it hit 20 bps in September, as unprecedentedly cheap insurance, are trading 55/60, or almost 200% "higher." This is the most 5 year US protection has cost since the market lows in March.
Given that Bernanke can print the United States government out of default, if it ever comes to that, it is remarkable that sophisticated investors (Retail investors are not buying credit default swaps)are bidding up CDS protection.

Bottom line: Market participants continue very spooked and some are hedging against extremely unlikely scenarios.

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