Ay ay ay. Spain’s five-year sovereign CDS curve has inverted:

Put simply, that means the CDS market now believes there’s a higher probability of a Spanish default in the short-term than in the longer term. Spain’s inversion follows that of fellow Club Med countries — Greece in January and Portugal in February, and again in late April.

So some people might well have been expecting the Spanish inquisition inversion. (Ahem).

Inversion España also means that all the CDS curves of PIIGS Club Med countries now look to be long-term inverted — though Ireland and Italy are rather more uneven. Click to enlarge:

For those interested, Hungary‘s curve also seems to have inverted in the past week or so.

Related links:
800,000 CDS trades – FT Alphaville
How sovereign bonds should be rated – FT Alphaville

This entry was posted by Tracy Alloway on Tuesday, June 8th, 2010 at 8:35 and is filed under Capital markets. Tagged with CDS, eurozone, government bonds, Greece, ireland, Italy, portugal, Sovereign default, Spain. Edit this entry.