Spreads highlight Ireland fears

marketwatch.com/news/story/I … E8DE43E%7D

LONDON (MarketWatch) – Fears that Ireland’s banking woes will send the Emerald Isle the way of Iceland has sent the cost of insuring sovereign Irish debt against default to record levels.
Spreads on Ireland’s five-year credit default swaps rose to a record 377 basis points on Friday, analysts said. That means it would cost $377,000 a year to insure a notional $10 million of debt against default. That’s up from around just $24,000 a year ago.
Ireland’s fiscal position has eroded sharply due to a steep economic slump. On top of that, add in the effective nationalization of the country’s three largest banks and expectations for further outlays.

if any of those CDS ever are called upon i bet half of them don’t pay.

the counterparty risk isn’t priced in, where is the evidence that this ‘insurer’ has the money to pay you given that its an over the counter product?

we’d be as well reading tealeaves as CDS

Their way of calculating the risk is pretty simplistic.