Sovereign Risk

Tyler Durden's picture

The Inversion Of Corporate and Sovereign Risk, Or The Sovereign Basis Trade





The recent spillover of the threat of an Eastern European collapse, and its gradual spread into the Eurozone, has manifested itself best in the dramatic widening of sovereign CDS. The so-called socialization of risk had resulted in a tightening of corporate and bank default risk at the expense of the respective sovereign domiciles.

 
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