Smoking Swap Guns in EuroLand: Sovereign Debt Buyer Beware!

Hickey and Walters (Bespoke) submit: The European aid package announced over the weekend has helped boost global equity markets across the board, and it has also caused sovereign debt default risk to decline significantly over the past two days. Below we highlight 5-year credit default swap prices ($, bps) for a number of countries around the world.

By Edward Harrison:Euroland is coming apart at the seams. Belgian/Bund spreads are now also over 200bps along with Italy and Spain. Belgium has just entered the periphery and France is not far behind.

Reggie Middleton submits:If I were to short any country, what country would that be? This is a trick question, for the fates of many European countries are now inextricably tied by what appears to be a poorly conceived methodology of handling diverse political and economic entities under a single currency without a truly authoritarian governing body. Basically, it's the old American saying, "Too many Chiefs and not enough Indians".

By Nicholas Pardini: The main mover for the markets in Europe (and the rest of the world) over the past month has been the recent developments in the European sovereign debt crisis. It has caused volatility to remain high and severe political overhaul throughout the Eurozone. With only the 32nd largest economy in the world, the prospect of Greece defaulting does not spell a death knell for Europe.

My main focus on the Greek crisis is how it will impact the global economy, and especially the United States, but nobody covering this issue can avoid the morality lessons.  First, Greece borrowed too much.  That’s bad.  Second, Greece cooked its books to conceal the magnitude of its deficit spending.  That, too, is bad.  Third, other European countries knew that Greece was doing this, but ignored it so as not to embarrass them or weaken the European Monetary Union.  That may have been the worst error of them all.

By Eric Parnell:The situation in Europe becomes increasingly more troublesome by the day. The latest bazooka rescue plan from the European Union on July 21 appears to have missed its target. The sovereign debt problems that have already infected Greece, Ireland and Portugal are increasingly spreading to Spain and Italy, with government bond yields back on the rise in these countries.