Or at least, not yet.
Bloomberg’s Chart of the Day is running with some startling text.
Jan. 20 (Bloomberg) — The U.K. government may lose its top AAA credit rating after taking a 70 percent stake in Royal Bank of Scotland Group Plc, credit-default swaps show.
The cost of hedging against losses on British debt rose to a record today and is now the same as protecting against default by RBS, rated two steps lower at Aa2 by Moody’s Investors Service and a further three levels lower at A by Standard & Poor’s. The CHART OF THE DAY shows the convergence of default swaps linked to gilts and the Edinburgh-based bank.What?
Despite its reputation for straight-up, no-nonsense newswire reporting, Bloomberg has a worrying tendency to over-interpret and over-simplify. Let’s help them.
Jan. 20 — Some people think the U.K. government may lose its top AAA credit rating…
In otherwords, while there are real fears about the state of the UK economy, pronunciations like Bloomberg’s are premature.
For a start, while spreads on UK CDS are rising — indicating investors are becoming more worried about the possibility of default or a downgrade, there are others doing worse. We reprise this chart from Think Big Bespoke Investment Group, showing one-month change in CDS for economies across the globe. While the cost of buying five-year credit protection on the UK widened to 133bp today, Ireland was out at 281bp from 275.2bp yesterday while Austria climbed to 157.5bp from 146bp.
Safety in basketcases indeed.
Related links:
CDS report: sovereigns rattle markets – FT Alphaville
PIGS to S&P slaughter – FT Alphaville