GERMAN CREDIT RISK: An Ominous New Phase In The European Crisis?

An interesting new development in Germany.

For the first time, its sovereign CDS are now wider than the UK.

Via FT Alphaville, here’s the chart:


Of course, the CDS market can be a dicey indicator, but we’d also note that we can’t remember the last day when European equity markets were getting smashed, while yields were HIGHER for German Bunds, as they are today.

Put another way, we can’t remember any time during this crisis, when people were really concerned with German credit risk at all, except in the most theoretical sense.

But of course, it’s totally logical. Europe’s weak sovereigns and banks look to Germany for rescue, and though it’s influential in the ECB, that’s not the same thing as having your own currency (like the UK, US, and Japan do).

P.S.: We take that back about nobody talking about German credit risk. Back in May, CLSA’s Chris Wood was advising clients to buy French and German CDS. And you’ve seen French CDS, right?

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