The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

The insanity of sovereign CDS

Levels quoted make no market sense whatsoever.

If anyone can offer a truly sensible rationale for the burgeoning market for sovereign CDS can they please let Euromoney know what on earth it is?

CDS have increasingly become a market reference point for gauging the creditworthiness of G10 countries in the past few months. As systemic fears were cleared up by the blanket provision of bank guarantees and injection of public debt so the CDS on those countries with large financial systems have widened. There is a certain logic to this. Seemingly it supports the view that there is no such thing as a free lunch – for sovereign states that is.

Let us consider what purpose buying protection on a G10 country can actually have. The most logical is that it is a mechanism for rates portfolio managers to manage their economic country risk exposure. While the market-to-market benefits might be apparent – the likelihood of the protection buyer actually being paid out must be remote in the extreme.

When Intesa Sanpaolo printed its €1.25 billion non-guaranteed bond in December, much was made of the fact that its CDS trades inside that of Italy – 110 versus 190. This is clearly anomalous and must surely make a mockery of this so-called market.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree