Written by Wilfred Ling Wednesday, 27 July 2011

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The chart above was taken from this website: HERE

My comment: The credit default swap (CDS) on US debt has spiked recently. The fact that there is a market for CDS on US debt shows two things: there are those who thinks US will default and thus they are placing bets or hedging their positions. Second, there are people who thinks their swap counterparties are more credit worthy than the most ‘powerful’ country in the world. The swap counterparty need to be more credit worthy than the underlying otherwise nobody will be keen to engage in a swap.