Monday, November 23, 2009

David Oakley: Bets rise on rich country defaults

...In the past, the CDS market for developed countries was sluggish, because few investors saw the need to buy or sell protection against a risk of default that seemed exceedingly remote. However, rising debt levels and growing political and economic uncertainty has created a more active market, with more investors now seeking insurance. Meanwhile, many banks are prepared to offer protection in exchange for a fee.

This fee has recently jumped, as the cost to insure the debt of developed countries has increased since the summer of last year, while the cost of insuring emerging market debt has fallen.

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