CDS spreads tighten in Q3

Higher probability of defaulting on debt

Spreads on five-year credit default swaps (CDS) tightened by six percent over the third quarter of 2012, according to figures released by CMA Datavision. Spreads on five-year CDS stood at 449 basis points at end-September.

Lebanon ranked ninth out of the ten most risky sovereign credits, behind Egypt. Greece had the most risky sovereign credits, while Norway had the least.

The five-year cumulative probability of default (CPD) was 27.9 percent at end-September. It was 27.6 percent at end-2011, and 19.2 percent at end-2010. The CPD quantifies the probability of an issuer being unable to honor its debt obligations over a given time period. Globally, Lebanon’s CPD ranked it in 10th place. Its CPD was higher than Italy’s and lower than Iraq’s.