Global Investing

They’re lovin’ it

November 27, 2008

After a round of tax cuts, fiscal expansion and other bailout plans in the United States to rescue the economy, investors are betting that the chances of a U.S. government debt default are almost equal to the probability of a default by hamburger chain McDonald’s.

The cost of insuring U.S. government debt against default for five years is $48,562 a year for $10 million of U.S. Treasuries or 47.562 basis points, according to Credit Default Swaps (CDS) prices.

This compares with around $54,750 a year for McDonald’s or $41,000 for telecom company AT&T.

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