A New Set Of Credit Default Spreads Are Exploding, And For New Reasons

Australia’s two major commodities producers, BHP and Rio Tinto, are already feeling the double-whammy of Chinese liquidity tightening via higher reserve requirements for banks plus new Australian resource taxes. According to CMA Datavision, their credit default swaps (CDS) have been some of the worst performing out there. Those for China aren’t too far behind. Note this is a CDS deterioration with far different roots than most CDS deterioration we’ve seen so far which has been due to sovereign debt concerns in the U.S. and Europe. This is how threat of a China slow-down hits the debt market:

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