April 2008 (FT):
Details of the investigation are confidential, but the authorities are expected to pay close attention to movements in the credit default swap markets for Iceland’s banks. Spreads in these markets – a proxy for investors’ fears the banks will collapse – have ballooned from about 50 last August to more than 1,000, indicating a very high level of fear about their viability.
The suspicion is that speculators exerted undue pressure on the illiquid CDS market in the knowledge that the wider the spread went, the more fear of a banking collapse would contaminate the stock and currency markets.
March 2009 (Bloomberg):
Irish Finance Minister Brian Lenihan said credit-default swap bets on Ireland are “misconceived” and that the nation isn’t in immediate danger.
Still, he said he accepts that the Irish state finances are under “stress.” Lenihan made the remarks at an event in London today.
FT Alphaville would like to point out that so far this crisis, it’s sovereign CDS 2 (Iceland, Ecuador) – government officials 0.
Related links:
Irish ratings brawl – FT Alphaville
The lot of the Irish – FT Alphaville
The sovereign ratings on the wall – FT Alphaville