Saturday, 2 June 2012

Selected Credit Market Charts

Below is a selection of our customary update of credit market charts, including the usual suspects: CDS on various sovereign debtors and banks, bond yields, euro basis swaps and a few other charts. Charts and price scales are color coded (readers should keep the different price scales in mind when assessing 4-in-1 charts). Where necessary we have provided a legend for the color coding below the charts. Prices are as of Thursday's close.
CDS spreads have continued to march higher, with CDS on Spain reaching 599.3 basis points, a new record high. CDS on Italy also continued to rise, ending at 564,67 basis points, which brings them within spitting distance of the panic high of last year. CDS on Greece's 'new bonds' post PSI now trade at a new interim high of 8,751 basis points, which is hardly a ringing endorsement of the country's creditworthiness. In fact, this means that the probability of a default remains extremely high in spite of the PSI deal wiping €100 billion off Greece's debt – the country is amassing new debt through the bailout funding as fast as it has shed its old debt to private bondholders.
Spain's 10 year yield eased off slightly on Thursday but is rising again today. However, the yield curve flattened further, with the rise in 2 year yields continuing unabated, a very ominous sign.
CDS spreads on CEE nations are also rocketing higher, with Croatia, Romania, the Ukraine and Latvia notable standouts.
Our European bank CDS index is consolidating around the 430-435 basis points level, which is almost twice its 2008 crisis high value. In short, the markets continue to be extremely wary of European banks (if we were to construct an index containing only CDS on 'PIIGS' banks, then it would trade a noticeably higher level, but we have included some other major banks on purpose to give a broader overview. Needless to say, the current index level is  alarming).
Euro basis swaps have bounced a bit, but remain at distressed levels, especially the longer dated ones. The short term (three month) swaps are holding up far better as they reflect the availability of the Fed-ECB currency swap window.

5 year CDS on Portugal, Italy, Greece and Spain – Spain at a new record high of 599.33 basis points, Italy at 564.67 basis points – click chart for better resolution.

5 year CDS on France, Belgium, Ireland and Japan – all moving higher once again - click chart for better resolution.

5 year CDS on Bulgaria, Croatia, Hungary and Austria - click chart for better resolution.

5 year CDS on Latvia, Lithuania, Slovenia and Slovakia - click chart for better resolution.

5 year CDS on Romania, Poland,  the Ukraine and Estonia - click chart for better resolution.

Our proprietary unweighted index of 5 year CDS on eight major European banks (BBVA, Banca Monte dei Paschi di Siena, Societe Generale, BNP Paribas, Deutsche Bank, UBS, Intesa Sanpaolo and Unicredito) – consolidating at an elevated level - click chart for better resolution.

Three month, one year, three year and five year euro basis swaps – a tiny bounce here - click chart for better resolution.

Spain's 10 year government bond yield – slightly lower on Thursday, but rising again today - click chart for better resolution.

Spain's 2 year yield has kept rising, flattening the yield curve. Yields are now very overbought (the mirror image of oversold bond prices) so a pause would not surprise  us. However, the caveat remains that whenever 'oversold' markets continue to sell off,  the danger of a crash or mini-crash becomes elevated - click chart for better resolution.

Contrary to Spain, Italy's 10 year yield remains a good distance below its 2011 high – however, it remains stuck at over 6% for now, hardly cause for celebration - click chart for better resolution.

10 year government bond yields for Spain, Italy, Portugal and Greece' - click chart for better resolution.

UK gilt yield (yellow), Austrian 10 year yield (Green) , Irish 9 year yield (white), [ignore the orange line, this is an incorrect quote] - click chart for better resolution.

 Charts by: Bloomberg


  1. Great charts, really good resource this. I like articles which are heavy with global macro charts! Keep it coming.

  2. Thanks for revealing this super valuable resource!