The European contagion effect starkly illustrated below:
That’s Portugal’s sovereign CDS curve and it has inverted — indicating that the market now believes there’s a higher probability of a default in the short-term than in the longer term. Or at least, they’re paying more for short-term protection against Portugese debt defaulting than for longer-term.
FT Alphaville readers will remember that Greece’s curve inverted almost three weeks ago. Portugal had been flattening for some time, Spain’s CDS term structure meanwhile, remains stubbornly upwards-sloping:
That’s despite the purported speculators.
Related links:
The ever increasing parallels between AIG and Greece – ZeroHedge
Joe Stiglitz calls for Europe to ‘teach the speculators a lesson’ – The Telegraph
That Greek CDS trigger – FT Alphaville