Cost of debt default insurance may rise

Saturday, February 06, 2010

London: The cost of insuring against US and British debt defaults may rise in the same way as it has for so-called European peripheral nations including Greece and Portugal, Deutsche Bank AG said.

"The problems currently faced by peripheral Europe could be a dress rehearsal for what the US and UK may face further down the road," Jim Reid, a strategist at Deutsche Bank in London, wrote in a research note.

"These countries have similar issues to those facing peripheral Europe but have the luxury of a flexible currency up their sleeves as a first defence if the market wants to attack them," Reid said. "Such a defence means that the market, for now, thinks there are easier targets."

Credit-default swaps on the sovereign debt of Greece, Spain and Portugal rose to record high levels, according to CMA DataVision prices.

This story appeared in the printed version of the Irish Examiner Saturday, February 06, 2010