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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: MythMan who wrote (403288)4/22/2010 7:02:05 AM
From: Giordano Bruno  Read Replies (1) of 436258
 
Lol, exactly how is this meaningless?

LONDON—The cost of insuring Greek and Portuguese bonds against default has leapt to new record levels Thursday, while the euro also sank fast as the European Union's statistics agency said Greece is running an even bigger budget deficit than originally thought.

Eurostat said the Greek government's budget deficit was 13.6% of gross domestic product last year—much higher than the 12.7% estimate by the government. The statistics office also repeated its reservations about the quality of Greek budget figures.

The 16-country single-currency plunged after this fresh reminder of the strained finances in some of the euro's weaker member states, dropping by 0.3% to a session low of $1.3355 against the dollar, according to trading system EBS. The euro also plunged towards a three-month low against sterling.

The cost of insuring Greece's sovereign debt against default using credit default swaps had already surged to a fresh high above five percentage points before the Eurostat announcement. It later leapt up to 5.5 percentage points, according to a trader.

That means the annual cost of insuring $10 million of Greek sovereign bonds for five years has risen more than $65,000 from Wednesday's close, to $550,000.

Portugal's five-year sovereign CDS spreads hit 2.48 percentage points—their widest-ever level—after closing Wednesday at 2.28 percentage points. Meanwhile, Spain's sovereign CDS spreads were around seven basis points wider at 1.66 percentage points, according to Markit.

CDS are derivatives that function like a default insurance contract for corporate debt. If a borrower defaults, the protection buyer is paid compensation by the protection seller.

Swap buyers may be protecting investments they own or simply making bearish bets against companies or countries.

Write to Mark Brown at mark.brown@dowjones.com
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