Australian CDS Spreads Worsen

11 May

Amid all the anxiety over debt-laden European countries and their banks, few seem to have noticed ominous signs for Australia.  Late last week, as fears really began to rise about the Eurozone, spreads on credit default swaps (CDS) for Australia’s sovereign debt widened the most of all countries in the world except New Zealand.

What does that mean?  Simply, as fears rose about European countries defaulting on their debts, the cost of taking out “insurance” against Australia defaulting on its sovereign debt increased by more than almost every other country.

From CMA Market Data‘s “Sovereign Risk Monitor”:

Friday, 7 May 2010 — 23:30

Sovereign Wideners
Entity Name 5 Yr Mid Change (%) Change (bps) CPD (%)
New Zealand 68.27 +13.91 +8.34 5.80
Australia 54.14 +12.35 +5.95 4.64
Chile 98.64 +11.01 +9.78 6.74
Korea, Republic of 129.84 +10.59 +12.43 10.86
Japan 89.39 +10.32 +8.37 7.73
United Kingdom of Great Britain & Northern Ireland 99.50 +9.26 +8.44 8.44
Qatar 103.29 +8.14 +7.78 7.02
South Africa 190.42 +6.88 +12.26 12.59

Could this reflect the markets losing confidence in Rudd Labor’s ability to manage the economy?  After all, this dramatic deterioration in the markets’ perception of our ability to repay our Rudd-spent sovereign debts also coincides with the government’s announcement of their new Resources Super-Profits Tax –  a tax on our only remaining productive sector (apart from agriculture).

It also comes just days before the next Budget… one which few could seriously believe will genuinely rein in Rudd Labor’s massively wasteful spending and set a determined course for a return to budget surplus.

When it comes to Rudd Labor’s economic (mis)management, it seems the markets are speaking loud and clear.

Is anyone listening?

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