Here is the latest sovereign CDS volumes from DTCC. The two charts show the net CDS outstanding (one month average) and the daily trading volume (also one month average).
A Few Items To Note:
- Italy and Spain being in the top 5 is not a surprise, but it looks like France is also a concern to market participants. The new Socialist government is not helping the matters.
- It seems that Brazil's slowdown and capital outflows are causing lively activity and large net exposures in the CDS of that nation.
- Germany is making the top 5 as well. That is an indication that traders are once again pricing in the risk that Germany will have to bail out (directly or indirectly) a large periphery nation at the expense of increased leverage (debt/GDP). That "bailout" could also take the form of addressing a default / re-denomination, should such a periphery nation exit (for example having to recapitalize Eurozone's institutions). That concern is causing German CDS to widen out, even as bunds trade at historically low yields.
