European Bank CDS Spiking On New Bond Holder Haircut Worries

CDS prices on European Union banks are spiking as a result of continued concerns over haircuts to bondholders.

This makes sense. If suddenly everyone expects the eurozone’s leaders to get serious about a new regime in which debt will be written down on banks in the event of a bankruptcy or default, then they are going to start buying insurance against that debt.

Or speculators are going to jump in to the market, anticipating default.

First, eurozone sovereigns. The spike is apparent there (via CMA Datavision):


Next, eurozone banks. Not specific to any country (via CMA Datavision):


Finally, Spain, the country next in the crosshairs of speculators (after Portugal, of course):


These may be the next dominos to fall in Europe >

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