The Great Debate UK

Sovereign default risk, fact or fiction?

-Jane Foley is research director at The opinions expressed are her own.-

If a gauge is needed to measure how concerned investors are at about sovereign default risk, we need look no further than the price of gold which has made fresh all time highs this week.

Assets with intrinsic value are in demand.

U.S. Treasury debt has also fared well on the back of safe haven buying over recent weeks; it is possible that the dollar could be entering into a renewed period of broad based strength as a consequence of risk aversion.

However, the solid demand for U.S. debt has not prevented the US authorities being wary about the risk of contagion from the European fiscal crisis;  after all the US budget deficit may hit 11 percent of GDP this year which is not too far behind that of Greece (at 13.6 percent).