Credit Default Swap Spreads Widen as Markets Price in Risk of Default
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Credit default swap spreads (CDS), which tracks the cost per annum to protection against a default, increased in Europe and financials last week according to Fitch Solutions' latest Risk and Performance Monitor. The move in spreads was caused by uncertainty surrounding prospects for Spain and the difficulties in its banking sector.
CDS on European sovereigns widened out 4 percent on average last week, with Spain at the forefront, widening 10 percent. Spreads on Portugal came in 3 percent, though it is still trading at the widest level among European sovereigns.
In North American, financial institution spreads widened 2 percent, with insurance companies and banks leading the selloff. Spreads on JPMorgan (NYSE: JPM) moved out the most among US banks (13% wider). Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) were also notable underperformers with CDS widening 6 percent each, according to the data by Fitch.
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CDS on European sovereigns widened out 4 percent on average last week, with Spain at the forefront, widening 10 percent. Spreads on Portugal came in 3 percent, though it is still trading at the widest level among European sovereigns.
In North American, financial institution spreads widened 2 percent, with insurance companies and banks leading the selloff. Spreads on JPMorgan (NYSE: JPM) moved out the most among US banks (13% wider). Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) were also notable underperformers with CDS widening 6 percent each, according to the data by Fitch.
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