Tuesday, November 25, 2008

The Armageddon Index

(FT Alphaville) 5yr CDS on the debt of the United States of America closed at 42bps yesterday - widening further on yet more bailout news: more rumours surrounding the planned “historic” Obama stimulus package.
Bloomberg, by-the-by have estimated the total - potential - US government support to the markets to be somewhere around $7.7 trillion.

Thus the continuing upward movement of CDS on the USA. The graph below shows the spread on the benchmark 5 year senior contract.
USA CDS

And so we announce the inauguration of the FT Alphaville Armageddon Index: of US corporations supposedly less likely to default than the US government. Testament either to the foibles of illiquid CDS readings or the folly of the UST. You decide.

Safer than the USA:

AT&T Mobility (28bps)
Baxter International (24.5bps)
Campbell Soup (31bps)
Ingersoll Rand (40bps)
Lockheed Martin (30bps)
McDonalds (29.5bps)
Wyeth (35bps)

So thats drugs, canned goods, arms firms and haemophilia experts. Sounds about right.

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