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Germany to the Rescue! – Update I

Posted by Dr. Constantin Gurdgiev @trueeconomics
22 February 2009

“..Now a peak at the CDS spreads again (hat tip to BL). To my earlier post (here) see the chart below: Jeez – we have Irish CDS reaching toward Philippines around mid February..

…But hold on, if the CDS rates are not a decent measure of implied default probability and a purely speculative tool instead (as our Nobel-prize contesting gurus from Davy, the DofF and CB keep telling us), why should the CDS data track closely the yield spreads? Maybe because they ‘kinda feel so, man!’ or maybe because the speculators in both markets are all in some global conspiracy club (wearing Venetian Carnivale masks and speaking in secret signs), or maybe, just maybe, both markets are really not buying the DofF-led and Davy-repeated story of ‘no risk of default for Ireland Inc’.

Either both, the markets for CDS and Irish bonds are wrong, or Davy and the Government are. Take your pick.” Link to full article with charts

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