Wednesday, February 8, 2012

8/2/2012: A more pleasant Sovereign arithmetic

And for a rather more pleasant sovereign arithmetic, here's an interesting table from the Global Macro Monitor (link here) summarizing yoy movements in 5 year CDS:

Frankly speaking, all of this suggest some severe overshooting in CDS and bonds markets on upward yield adjustments over time followed by repricing toward longer term equilibrium. What this doesn't tell us whether we have overshot equilibrium or not... Time will tell.

1 comment:

eamonnmoran said...

"Cost per year to insure 10,000".

The language is important because it legitimises the whole CDS industry.

It is not insurance because you do not have the have an insurable interest to buy this product. In many cases its a bet. Its a tool used by financial engineers to extract profit without adding any value.