Default Risk For Financials Shoots Up

During the financial crisis, we created an index that tracks credit default swap prices for the major banks and brokers across the world.  This essentially measures default risk for the financial sector.  After declining significantly for the past 9 months, the index has spiked in recent weeks to its highest level since last September.  As shown below, the downtrend line in the index has also been broken on the run-up as well.  In just a couple weeks, the fear has picked up quite a bit.

Subscribe to Bespoke Premium to receive access to our Bank and Broker CDS Index on a regular basis, along with much, much more.

Comments

[Senan]

And fear is the biggest enemy at the moment. It hasn't been a good start ot the year. There were many doomsday predictions pre-Christmas, but the markets kept thundering on. Now it looks like its time to hold back to re-analyse positions.

[James]

Fear is not the biggest enemy; the greatest enemy we have is ignorance. The economic summit in Davos is an example of this. People are beside themselves on how to deal with the banking and credit crises. These so called masters of the universe are the very people who created these problems and allowed them to fester into the crises we see before us.Albert Einsten said [ if you wish to solve a problem you do not give the job to the ones who solved the problem in the first place].