Bonds News

Credit risk growing most in Greece, Portugal, France

NEW YORK, Jan 29 (Reuters) - Sovereign credit risk has grown most sharply for Greece, Portugal and France since September because of investor sales of various government debt, according to a report by Credit Derivatives Research on Friday.

A widely tracked sovereign credit default swap index shows that 16 of the top 81 countries have shown credit risk increasing by more than 50 percent, with Greece’s sovereign credit default swap levels rising by more than 250 percent since September.

Portugal’s CDSs rose the second most, by 217 percent, followed by France (122 percent), Spain (111 percent), the United States (100 percent) and Japan (95 percent) as the countries where risk is rising the most.

The report found so-called “real money investors,” those holding investments for longer than short term, hedge-fund traders trying to take advantage of high volatility, may be large sellers of government debt, accounting for the wider spreads and increased risk in developed nations’ credit profiles.

“We believe the dramatic rise in CDS spreads of many sovereign nations is rising due to arbitrage-free pricing with the cash bond markets and not in any way driven by a cabal of ancient and mysterious CDS traders,” Tim Backshall, chief strategist at Credit Derivatives Research, wrote in the report.

Among countries with the biggest tightening moves in five-year credit default swaps since September 2009, Costa Rica narrowed 56 percent, followed by Pakistan (-55 percent), El Salvador (-54 percent) and Estonia (-30 percent), the report found. (Reporting by Walden Siew; Editing by Padraic Cassidy)