Greece, most risky, Norway the least risky sovereign credits - CMA report


Embattled Greece tops the global table of the most risky sovereign credits in the world, as it has been for much of the past year, while Norway continues to head the least risky sovereign issuers, according to a report on liquidity metrics from CMA Datavision Bonds, which provides independent, intraday pricing on some 1,400 single name CDS and CDS indices.

The report said Sweden, Slovenia and Slovakia were the worst performers for Q4 2011, following markets assessment of the impact of the deepening crisis in the Eurozone and the impact on bank lending and growth prospects.

“A restructuring and write-off of Greek debt remains an almost certain event,” the report noted.

“However the debate continues as to whether a default will be triggered, or whether the debt swap plan will be accepted by bond holders.”

Five year upfront protection in Greece closed at 66% on December 29, with the 2015 bonds closing at 24%. As 15% of the current debt swap plan is cash, either the new bonds are worth 9% or the market is assuming the debt swap plan will not be accepted by bond holders, CMS said. Slovenia widened 46% as Moody’s downgraded in late December; and Fitch put the country on negative watch.
Ireland remained relatively stable throughout the quarter, perhaps indicating a balance between a well capitalised banking sector and IMF concerns about the prospects for growth in exports to Europe. CDS spreads in the UK remained relatively stable as it faced a tough political quarter in which European leaders work on a new treaty to deal with the debt crisis.

In Scandinavia,Denmark ended a very volatile period 7% tighter on the quarter, and a tightening of spreads in Norway, Finland and Denmark was offset by a 22% widening in Sweden, leaving the overall average of the region flat. Emerging Europe widened 10% overall, in line with Western Europe.

Disagreements between the IMF and Hungary on central banking reforms did not help CDS prices which widened out 18%. The rating was cut to non-investment grade (BB+) by S&P in late December and CMA’s implied rating is now CMA_b+. Only Poland and Ukraine finished the quarter slightly tighter when compared with Q3.

The report noted that Egypt aside, the Middle East and North Africa remained relatively stable and flat overall for Q4 2011. Spreads in Turkey crept over 320bp from 230bp in November, indicating a strong dependence on Western Europe, but ended the quarter tighter by 1%.