12/1/2012: Q4 2011 Sovereign Bonds Report

CMA released their Quarterly Global Sovereign Risk Report Q4 2011 which makes for an interesting reading. Here are some highlights:

"The Eurozone debt situation continued throughout Q4, with the region widening 9% overall. A bail out of Dexia at the beginning of the quarter was followed by continued concerns on Italy’s debt in November and risk of an S&P downgrade of the entire Eurozone in December.

"Nearly all global CDS prices widened during November’s volatile period, clearly indicating the significance of Western Europe to the global economy and the importance of finding a permanent resolution to the debt crisis.

• Italy’s austerity measures failed to move the market tighter in Q3, and the spread widened to a high of 595bp in-mid November. This prompted the end of the Bersculoni era, a new president [obviously, they mean PM] and a new set of austerity measures aimed at reducing the 2 trillion dollars of debt and 120% debt-to-GDP ratio. Implied FX devaluation from a default in Italy is around 17% according to CMA DatavisionTM Quantos.
• Spain and Belgium’s charts were a mirror image of Italy’s.
• Ireland remained relatively stable throughout the quarter, perhaps indicating a balance between a well capitalised banking sector and IMF concerns about the prospects for growth in exports to Europe."
• Greece was the worst performer worldwide (see tables below charts), while Portugal outperformed Ireland

Charts:

Summary of 10 highest and lowest risk sovereigns:

 

So despite our 'gains' in the bond markets, Ireland moved into 6th highest risk position in Q4 2011 from 7th in Q3 2011. 

And amongst the safest bond issuers there are just 2 euro zone countries: Finland and Germany (an improvement on Q3 2011 where only Finland was there).

Here's the summary of our performance since Q1 2009.