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Developed World Default Risk In Race To Top After German, UK CDS Surge By 50% In Two Weeks

Tyler Durden's picture




 

Many associate exploding CDS as a feature of backward third world countries, or, as they are better known these days, PIIGS. It may thus come as a surprise to most that the default risk of not only the US, which we reported had recently hid a multi year high, but especially Germany and the UK have surged by well over 50% in the past month. In fact, Germany, by most objective evaluations, an economy that is far more resilient and productive than America's, has in the past 3 days seen its CDS surge to a level 10 basis points wide of the US. And if not the actual economy, what then? Why such monstrosities as Deutsche Bank and Commerzbank, which as reported previously have caused many to doubt are as viable as the stress tests represents, and whose combined asset bases are well over the total GDP of Germany. As the for the UK, after trading at around 55 bps for months, the spread has jumped to nearly 80 bps. So as Sigma X indicated earlier that it may now be time to shift attention to the UK, have the vigilantes already succeeded in penetrating all the way to the very core of the Eurozone? Or, courtesy of ISDA's criminal abdication of its responsibilities by pre-determining that no development in the future of Greece would be an event of default, perhaps the only natural response now is to buy protection on those names which have not blown out to ridiculous (read 600 bps or wider) spreads. Which, however, is very bad news for the Eurozone core, as going forward investors will simply hedge peripheral cash risk with core synthetic: a process which will result in the eventual wipe out of both instruments. But that's precisely what happens when the CDS administrator and "regulator" decides to play ball with the central planners instead of the siding with market participants: unintended escalating consequences galore.

 

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Tue, 07/19/2011 - 00:00 | 1469108 IQ 145
IQ 145's picture

 Germany! Ach. say it isn't so.

Tue, 07/19/2011 - 00:09 | 1469135 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

That's what they get for loaning all of their assets away.

Tue, 07/19/2011 - 00:50 | 1469218 DoChenRollingBearing
DoChenRollingBearing's picture

Mr Lennon,

I do not understand why so few have panicked into gold and silver.  Mystifies me.

Who understands these CDOs, CDSs, IRSs, etc?  1 / 1000?

Preservation of wealth is key now.  Not much time, amigos, 'til TSHTF!

 

Prepare, prepare even more quickly, time may be very short!

Tue, 07/19/2011 - 02:36 | 1469333 Bang Dae Ho
Bang Dae Ho's picture

yesterday on TV, questions by the audience, answered by the editor of some retail investment magazine... Q: Shall I buy PMs now? A: PMs are expensive, hard to store, and furthermost they are highly speculative.

And you know what: He is actually right. HOWEVER: He (and the entire mainstream) forgets to mention how speculative any kind of fiat investment has become.

Tue, 07/19/2011 - 02:53 | 1469346 Reptil
Reptil's picture

Highly speculative (on the upside) sounds good.

As for the "why", I guess arrogance, and reliance on faulty systems like the slave stream media (I borrowed that term, very fitting. ;-) is the reason, and now they're either on holliday with the family, or they're "frozen" (deer in the headlights).

fuck them.

 

Tue, 07/19/2011 - 03:15 | 1469369 Bang Dae Ho
Bang Dae Ho's picture

you sound angry... I have a silver eagle in my pocket / in my hands all the time. Cannot explain why, but it has a comforting and calmative effect. I am sure you can afford one examplar of this  device to try that.

Tue, 07/19/2011 - 00:05 | 1469118 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Greece should default and get this over with.

Tue, 07/19/2011 - 00:09 | 1469136 BobPaulson
BobPaulson's picture

The default comes once as many suckers as possible have bought the phoney financial instruments they are peddling.

I'd guess we get something like this:All debt goes to the public sector, all cash goes to the losers holding it in their funds, banksters take every nickel they can get and buy stuff (real estate, weapons, PM, oil, power plants), reset button is pressed.

Tue, 07/19/2011 - 00:18 | 1469150 AssFire
AssFire's picture

"To our knowledge, this is the first report of supernumerary breast tissue on the foot."

Goodnight Bob Paulson.

Tue, 07/19/2011 - 00:31 | 1469184 cosmictrainwreck
cosmictrainwreck's picture

LOL - the combo of the statement's nature, it's absurd irrelevance and the origin of said statement, taken together, are compelling. Kudos

Tue, 07/19/2011 - 00:51 | 1469221 DoChenRollingBearing
DoChenRollingBearing's picture

@ Mr Lennon,

Perhaps you mean "Greece should default and get this started!"

Tue, 07/19/2011 - 07:04 | 1469452 Al Gorerhythm
Al Gorerhythm's picture

Back @ both of you. The death of the PIIGS.

http://www.youtube.com/watch?v=t_JWywDqgRs

Tue, 07/19/2011 - 07:08 | 1469456 Al Gorerhythm
Tue, 07/19/2011 - 00:11 | 1469129 bob_dabolina
bob_dabolina's picture

This is indicative of a complete collapse of the eurozone.

uh...where is the drachma?

Tue, 07/19/2011 - 00:22 | 1469167 slewie the pi-rat
slewie the pi-rat's picture

i like the idea that if one wants credit default swaps on the parteee in europe, why not buy the cheap ones, at this point?  anything can happen.  who knows what zombie is gonna run completely amuck, next? 

if the idea catches on, there might be nice % gains. 

no counterparty risk either, right?  LOL! 

hi! i'm suzie from Black Hole Life & Casualty;  with this type of (wink, wink) insurance, the price is 100% determined by markets from which light does not escape.  wait till you see the ideas i have for your family!

Tue, 07/19/2011 - 00:53 | 1469209 DoChenRollingBearing
DoChenRollingBearing's picture

I am really starting to like slewie and Monedas...

Their writing styles belie an inner intelligence that seems off the charts!

Shine on you crazy diamonds!

EDIT:

Where are you dumpster???  Another genius sorely missed by me here at ZH...

Tue, 07/19/2011 - 00:24 | 1469168 RobotTrader
RobotTrader's picture

Check out the Triple Whammy German Bund ETF, now at world record highs.

Not very liquid, but shows people are willing to bandwagon just about anything with 3x leverage.

http://bigcharts.marketwatch.com/charts/big.chart?nosettings=1&symb=bunt...

 

Tue, 07/19/2011 - 01:00 | 1469235 bob_dabolina
bob_dabolina's picture

lick my taint

Tue, 07/19/2011 - 09:56 | 1469856 jerry_theking_lawler
jerry_theking_lawler's picture

i had a buddy who would put peanut butter on his taint and let his dog lick it off....

Tue, 07/19/2011 - 00:24 | 1469171 JohnG
JohnG's picture

It just keeps getting worse and worse.

Tue, 07/19/2011 - 00:27 | 1469176 LetThemEatRand
LetThemEatRand's picture

It's Obama's Marxism to blame again! Or maybe, just maybe, there is a group of very wealthy people who are screwing us all and turning us against each other. Or Obama fucked up Germany too. They are, after all, lazy socialists who retire at 35 or whatever is the fashionable thing to say at Tea Parties these days.

Tue, 07/19/2011 - 02:32 | 1469328 Transformer
Transformer's picture

Marxism?  WTF?  You don't see this very often on Zero Hedge.  Do you have the slightest idea what Marxism is?  Do you call him a socialist too?  Obama is just about as far across the spectrum from Marxism as you can get. Corporatist, fascist.  Look these words up.

Tue, 07/19/2011 - 05:17 | 1469396 zuuuueri
zuuuueri's picture

that spectrum itself is a mechanism of distraction and division to keep the just-clever-enough-to-hurt-themselves fools at each others' throats. it's about power, and the concentration of power, it's about wealth, and the concentration of wealth. Whether you paint 'marxist' or 'corporatist' or 'fascist' or 'liberal' or any other damn label on the outside does not change for a moment the true essence, or, more importantly, its relationship with the rest of the world. This relationship is aggressive, hungry, greedy, ruthless, and it will eat you without a second thought regardless of whatever ideological blatherings you think matter to it. Nothing matters to it but feeding its hungry appetite, and you, sir (along with the rest of the world), are on the menu.

Tue, 07/19/2011 - 06:02 | 1469423 AnAnonymous
AnAnonymous's picture

Offuscation...

Tue, 07/19/2011 - 07:55 | 1469508 tarsubil
tarsubil's picture

Yeap, people use labels to mock those that oppose tyranny. The battle from day one between government and the people is a matter of liberty vs tyranny.

Tue, 07/19/2011 - 00:33 | 1469187 bob_dabolina
bob_dabolina's picture

At least the SNB is willing to intervene.

Tue, 07/19/2011 - 00:35 | 1469189 Itsalie
Itsalie's picture

Maybe it has something to do with the CCP new decree that all cadres at local governments will stop buying audis/bmws pending the leadership transition. They need some moral authority even if they can't get inflation to go below 5% non?

 

Tue, 07/19/2011 - 00:44 | 1469210 chump666
chump666's picture

Greedy, greedy banks Deutsche Bank and Commerzbank are now a systemic risk to Germany via Greece, Spain will take out the greedy UK banks.  Now the EU cartel is delaying the inevitable just means major FUBAR on the EZ.

A toxic bond contagion. 

 

Tue, 07/19/2011 - 01:00 | 1469233 Caviar Emptor
Caviar Emptor's picture

Half the world's toxic....Ewww

Tue, 07/19/2011 - 03:01 | 1469352 Reptil
Tue, 07/19/2011 - 01:05 | 1469243 gwar5
gwar5's picture

Looks like things are setting up for another little Ice Age in Eurotopia. 

If things go tits up there, Bernanke and Obamao will have to crash us, too. That is apparently how the grand currency suicide pact works. We must all fall down at the same time so TPTB can start the NWO and the global funny munny.

 

Tue, 07/19/2011 - 01:09 | 1469247 Caviar Emptor
Caviar Emptor's picture

What name for a new global currency bundles the most national, regional and cultural references but could still be printed on a bill?

EuZhongMeric? 

Tue, 07/19/2011 - 05:34 | 1469356 Bang Dae Ho
Bang Dae Ho's picture

I do not know how it will be called officially, but I will call it SLAVE CONFETTI.

Tue, 07/19/2011 - 05:18 | 1469397 InvalidID
InvalidID's picture

 I think we should name it the Fiat Unification Currency for International Trade

 

 

 

 

Tue, 07/19/2011 - 01:11 | 1469249 Paul Thomason
Paul Thomason's picture

This is a well written article.  Good stuff!.

Tue, 07/19/2011 - 01:38 | 1469278 bob_dabolina
bob_dabolina's picture

Is China trying to find buyers for euros? 

ha

Color me irony

Tue, 07/19/2011 - 03:04 | 1469279 TruthInSunshine
TruthInSunshine's picture

Global Jubilee is coming soon.

Get some.

 

Must Study Selective Default Options - ECB's Nowotny
Tue, 07/19/2011 - 01:53 | 1469305 ebworthen
ebworthen's picture

 

Why didn't they call CDS's "Juggling with someone else's eggs"?

 

Tue, 07/19/2011 - 01:58 | 1469306 SAME AS IT EVER WAS
SAME AS IT EVER WAS's picture

this may not be total bullshit but there will be but only a few more times to BTFD untill the s&p gets to 1500-1750, and then wash,rinse, and repeat.

Tue, 07/19/2011 - 02:11 | 1469310 chump666
chump666's picture

spanish 10yr looking like going 7%

Tue, 07/19/2011 - 02:44 | 1469341 Reptil
Reptil's picture

It's on now; dutch parliament broke off recess (paid holliday) this weekend to discuss the financial crisis on thursday. Unheard of developments! Politicians to the rescue! </sarc>

Tue, 07/19/2011 - 03:04 | 1469357 AldousHuxley
AldousHuxley's picture

What happens to counterparty risk to soverign CDS when there is a soverign default. Is this when the monetary central banking system finally crashes so that humanity can move forward?

Tue, 07/19/2011 - 03:04 | 1469358 AUD
AUD's picture

1000 English Pounds!

I won't take under.....

Tue, 07/19/2011 - 06:38 | 1469437 ViewfromUnderth...
ViewfromUndertheBridge's picture

ha ha...Magic Bus...get on it!

Tue, 07/19/2011 - 06:38 | 1469439 ViewfromUnderth...
ViewfromUndertheBridge's picture

ha ha...Magic Bus...get on it!

Tue, 07/19/2011 - 03:36 | 1469373 midnight
midnight's picture

"Many associate exploding CDS as a feature of backward third world countries, or, as they are better known these days, PIIGS."

 

So, the manufacturer of Ferraris is a backward third world country these days?

 

You realize that ZH is read in Europe, right?

 

Tue, 07/19/2011 - 04:58 | 1469387 putbuyer
putbuyer's picture

What a nice chart!

Tue, 07/19/2011 - 05:14 | 1469395 Bang Dae Ho
Bang Dae Ho's picture

So, the manufacturer of Ferraris is a backward...?

definetely! What could be more pre-civilization-patriarchic-phallic than Ferrari, Lamborghini etc.? :)

when you appreciate politeness, diplomacy and political correctness, this is good, even I do occasionally, but ZH might not be the web's center for it.

Tue, 07/19/2011 - 04:50 | 1469385 Noah Vail
Noah Vail's picture

You realize that we consider the US as third world country?

Tue, 07/19/2011 - 05:14 | 1469394 tallen
tallen's picture

http://af.reuters.com/article/metalsNews/idAFL3E7II0W920110718

Hong Kong Mercantile Exchange to launch silver futures on July 22

Looks like the final nail in the coffin for COMEX.

Tue, 07/19/2011 - 05:38 | 1469409 Highrev
Highrev's picture

When the put/call ratio is high, what do you do?

When CDS surge, what do you do?

Elementary my dear Watson.

 

Tue, 07/19/2011 - 06:00 | 1469421 chump666
chump666's picture

German ZEW index in recession territory.  kiss Greece bailout goodbye

Tue, 07/19/2011 - 07:53 | 1469504 No Bid
No Bid's picture

+1

 

well, -15.1 really, good comment/point though.

Tue, 07/19/2011 - 06:03 | 1469424 kaiten
kaiten's picture

Eurobond coming.

Tue, 07/19/2011 - 07:45 | 1469490 supermaxedout
supermaxedout's picture

A laughing matter. A CDS is a hedge against a default of Germany. What about US CDS? Who is paying the CDS in case of a default. Deutsche Bank or Bank of America ? Ha,Ha, Ha, 

Deutsche Bank is a zombie as well as BoA and as well as all other banks involved in the CDS business. The cat is biting its own tail. There exists no more a market for these wonderful financial innovations like MBS etc. Its not news from the markets its just propaganda from a dying system. Its game over soon.

Tue, 07/19/2011 - 08:07 | 1469528 Bang Dae Ho
Bang Dae Ho's picture

The entire world-fiat-ponzi-system is a zombie who is threatening to kill himself... the more people realize that he is already dead, the fiercer his threats are getting.

Tue, 07/19/2011 - 07:45 | 1469491 Poor Grogman
Poor Grogman's picture

Love the smell of panic in the morning

 

Tue, 07/19/2011 - 10:23 | 1469964 TK7936
TK7936's picture

NEIN NEIN NEIN NEIN!

Do NOT follow this link or you will be banned from the site!