Commentaries

This isn’t such a good sign for developed nations. Markit, the administrator of popular credit derivative indexes, has created another long-winded index, the Markit iTraxx SovX G7, to track the ups and downs in default risk perceptions of elite industrialized nations.

Sure, the index is part of a suite of indexes that will track the sovereign risk of other nations, but its inclusion is symbolic of how far developed nations like the US have fallen. I remember one journalist being heckled after he raised even the prospect of the US losing its AAA status a few years back. Now you can’t get away from the back and forth debate of ”is it or isn’t it worthy.”

From Markit:

Historically, the trading of sovereign CDS was limited to emerging markets, reflecting the credit risk associated with the government debt of these countries.  However, an actively traded CDS market in industrialised sovereigns has now emerged as a result of the financial crisis and growing investor concerns relating to the solvency of developed economies.

The indexes (you can see the full list here), will be rolled out in July.