Saturday, January 7, 2012

Today's Major Market Move: Austrian 5Y Credit Default Swaps Up 28% Since December 1st

As we kick off 2012, European economies continue to signal weakness, particularly in the credit default swap market. Except for Iceland, every EU and what we call "Fringe EU" country has seen their 5 year credit default swaps go up in price since the beginning of December. Austria's CDS were the top gainers over that time frame, due in no small part to the continued economic turmoil in Hungary (which we last discussed here), to which many Austrian banks have exposure.

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Another omen is the decline of the Euro, with the EURUSD cross down 15% off of the 2011 highs and it recently dropped through the 2011 lows.

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And then there's the equity markets where four of the top six declining benchmark equity indexes were from EU and fringe EU countries. Hungary's stock market was the worst performer with a decline of over 16% in a little over a month.

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