US Default Risk Hits 8-Month Highs

While still relatively low, USA sovereign CDS spreads have risen to 8-month highs, surging off early March lows. The reasons are likely numerous though we suggest the 4 surges in the last 3 months appear to line up with notable 'events'...

While correlation does not imply causation, it does waggle its eyebrows suggestively and gesture furtively while mouthing "look over here."

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Note: Sovereign CDS represent a combination both default and devaluation risks.

Could it be that Trump's honest comments on the creditworthiness of the USA are beginning to resonate with market participants as the probability of his winning in November rises?

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Comments

Moon Kil Woong 8 years ago Contributor's comment

It's more a factor of the market worrying that Trump could win and make enemies with all our trading partners causing shortages, inflation, and global instability. Sadly the alternative is the embodiment of corruption, Hillary Clinton leaving with America with no good choice in the election, especially since Trump refuses to uphold traditional fiscal conservative values. This makes the Republican candidate look bad as well.

Some people have pointed out really terrible market events are political in nature. I can see that one of those events may be forming and there may be no way to avoid it from happening given that both parties may cause a very bad political result in the near future.