Old Man Europe's CDS Update: Portugal is the next to fail and it could happen this week

Ireland was hovering at 515 just  a few days before they received a bailout.  If markets are a good indicator of risk, then Portugal is very close to the same end.   Portugal's Credit Default Swap yields are already above those of Ireland before they defaulted. 

Why do I say that it could happen this week?  Six days before Ireland defaulted their CDS yields were 515.  Portugal is now above that level.  In other words, the markets take the risk of Portugal defaulting as greater than that of Ireland just a week before they actually went with their tin cup to Brussels. 

Of course, their is no magic number that determines when a country will default, but as debt yields have increased, the cost of rolling over Portugal's existing debt has become prohibitive. The next rollover date is game over if spreads stay where they are.  If they go up, it could happen earlier. 

Spain of course if the big risk, but Italy seems to be climbing every day as well. 

Italy  --  233 bps
Spain  --  347 bps
Portugal  --  538.5 bps
Ireland  --  602 bps
Greece  --  951 bps

Source: Bloomberg


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