sovereign risk

Not one eurozone country deserved a credit rating upgrade in the past quarter, while some, such as Spain, deserved six-notch downgrades, new data show. Indeed, 13 of the worst-performing 15 countries were European (see Q-o-Q change column; source: CMA data).

The UK, by contrast, did deserve a one-notch upgrade. (The bad news is that even an upgrade leaves the UK’s implied rating one notch below its actual rating of AAA.) Far greater winners were Guatemala, Uruguay, Egypt, Bahrain and Colombia, which all merited multi-notch upgrades. Read more

It’s unclear what is making investors sell Greek debt. It may be the German stance. Yesterday, it seemed Germany wanted Greece to pay market rates for their debt, and now there are mumblings of Bundesbank opposition to the current bail-out plan.

Whatever the explanation, markets view Icelandic debt — think: Icesave woes — as a safer bet than Greek: the cost of insuring Greek sovereign 5-year debt is above its Icelandic equivalent for the second day. So it costs about €460k to insure €10m Greek debt, compared with €410k for Iceland (see chart). Read more

Are banks a safer bet than government entities in the United Arab Emirates? Three pieces of news today suggest so.

First, the cost of insuring against sovereign Dubai default has shot past its November 2009 levels – i.e. when the Dubai World/Nakheel problems were afoot. Read more