"Should the Republic of France really be trading as a credit two notches above junk?
Five-year credit default swaps on the French sovereign were trading at 110bps at pixel time, according to Markit.
In other words: if you’re taking the CDS market at face value, France is more of a credit risk than Thailand (100bps), South Korea (95bps), the People’s Republic of China (70bps) and Brazil (107bps) if not yet Mexico (110bps). And yes, the spread implies a Baa2 rating, versus the ratings implied by French government bond spreads, or assigned by the credit rating agencies — both of which remain at a solid AAA.
If you take the market at face value. Although even if you don’t, it may still depend on what view you take of the credit risks to the eurozone’s core sovereigns from a) bailing out the bloc’s periphery b) bailing out their own banking systems should various tail risks (national defaults, peripheral banking crises, eurozone exits) become real..."
at http://ftalphaville.ft.com/blog/2011/01/07/452046/sovereign-cds-un-petit-complexe-de-napoleon/
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