IS THE CDS MARKET SENDING A WARNING SHOT AGAIN?
Courtesy of The Pragmatic Capitalist
As the problem of debt refuses to go away and in fact, quietly spreads, we’ve seen another slow development over the course of the last few weeks – problems in Greece appear to be worse than originally expected and credit default swaps are sending warning messages again. The term structure in Greek CDS recently inverted as investors are now increasingly concerned of a default in the next few months. This is something we saw in 2008 before the financial markets nearly collapsed. That time the inversion was in Lehman Brothers and Merrill Lynch CDS.
As the problems in the banking sector unfolded in late Summer 2008 the sovereign debt of the big three developed nations began to skyrocket before reaching a crescendo in early 2009. What’s alarming with the situation in Greece is the similarities in
