In early January we highlighted the early warning signal (see here) that was the spiking in various CDS spreads. Well, Greek spreads are back near their January highs and the equity markets are once again ignoring the warnings:
Greek financial troubles continue to be a problem for the Euro as the currency trends towards its lows vs. the Greenback. It seems opinions continue to differ within Europe how to handle this situation and the politicians are not helping. There is word that the country is looking to bring a rather large debt deal to target to international investors…and the reception to the deal was not very friendly out of Asia.
Attached chart shows the 1 year price of a CDS (credit default swap) contract, signifying the market perception to the risk profile of Greek debt. The higher the premium for the CDS, the more likely the market perceives the likelihood of a Greek default. As you can clearly see, there was a spike last night and we are not too far away from the highs reached before the announcement of the recent austerity package.
We will continue to stay on top of the situation as it may have large implications for our financial markets.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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