Tag Archives: Morocco

Middle East CDS Spreads Explodes

The spreads on middle east sovereign CDS spreads exploded yesterday, and is assumed to continue to widen today as protesters fueled by Mubarak’s TV appearance are about to make the situation even more unstable. And the contagion is now evident. The costs of insuring debt of several nations in the area is skyrocketing, indirectly affecting the European sovereigns.

“More spreads volatility can be expected as the story unfolds.”

Gavan Nolan

The Egyptian sovereign CDS spread jumped a whopping 30 basis points Thursday, hitting a record wide of 305 bp’s, and is now approaching the Portuguese level. The most critical part, however, is that the rising financial costs is spreading to neighboring countries and even affecting Europe.

The Egyptian CDS spread tightened a bit before Egyptian president Mubarak’s TV speech, on expectations that he would announce his resignation.

Well, he did the exact opposite, sparking a new wave of fury amongst the protesters and providing more uncertainty about the whole mid-east situation.

Egyptian sovereigns closed at 305 bp’s (+20), pumping the spreads on Tunisian CDS’ up to 188 basis points (+17) and the  Moroccan up to 188 basis points ((+21).

In addition the Bahrain spreads widened 13 bp’s to 245.

Lebanese CDS spreads closed at 348 bp’s, Saudia Arabia 120 bp’s and the Israeli at 139.

These nations are closing in on the Spanish and Portuguese levels – next stop is the Irish level, while it’s still some way to go before they reach the Greek level around 1.000 basis points above the German benchmark.

It is obvious the there’s a group of “PIIGS” forming in the Middle East, consisting of Egypt, Bahrain, Lebanon, Morocco and Tunisia.

I’ve been trying to find a suitable acronym, but I’m still working on it. Any suggestions?




One might also include Israel and Saudi Arabia who also are infected with a CDS level of 139 and 120, respectively.

Then we have:





Okay, I’ll stop now…..

Here’s some quote from Markit’s credit analyst Gavan Nolan commentary, Thursday:

“This morning Twitter was alive with rumors that Saudi Arabia’s King Abdullah was dead. This was swiftly denied by the Saudi foreign minister, who said that the King was alive and well in Morocco. Nonetheless, the idle speculation caused the oil price to spike upwards before it recovered on the denials. Saudi’s sovereign spreads also widened sharply and didn’t really recover, though it should be noted that it is quite an illiquid credit (Markit Liquidity Score of 3).”

“Trading was light in other MENA names (Middle East NAtion) but Israel also saw some modest tightening. But it is still unclear how the transition from the current form of government will develop, though we can be fairly sure that the army will play a major role; as it was always likely to. More spreads volatility can be expected as the story unfolds.”

“Did markets in Europe and North America finally sit up and take notice of the Egypt revolution? There was some improvement in risky assets late afternoon, though how much of this was due to Middle Eastern developments is debatable. The Markit iTraxx Europe opened wider and stayed there until the close. It broke out of the 95bp-97bp range, where it has been trading for most of February, before recovering towards the close.”

“Aside from Saudi Arabia and Egypt, European sovereigns were not without incident. This morning Portugal’s CDS spreads widened sharply after bond yields reached unprecedented levels. This in turn prompted the ECB to enter the market and buy Portuguese government debt, the first time it has intervened for a few weeks. The intervention was effective, at least partially, and caused peripheral spreads to come back in from their earlier wides.”

  • Markit iTraxx Europe 97bp (+0.75), Markit iTraxx Crossover 397.25bp (+2.25)
  • Markit iTraxx SovX Western Europe 170bp (+2)
  • Markit iTraxx Senior Financials 162.5bp (+4), Markit iTraxx Subordinated Financials 272.5bp (+2.5)
  • Sovereigns – Greece 829bp (+15), Spain 238bp (+3), Portugal 440bp (+11), Italy 173bp (0), Ireland 565bp (+5), Belgium 168bp (+3), France 90bp (+1)
  • UK 60bp (+1)
  • Egypt 335bp (-20), Tunisia 188bp (+17), Morocco 188bp (+21), Saudi Arabia 120bp (+12), Bahrain 245bp (+13), Qatar 98bp (+2), Lebanon 348bp (-7), Israel 139bp (+4)

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Credit Markets: Calm & Consolidated

It seems that the credit markets are in the midst of one of their quietest periods for some time as investors look to consolidate after the recent rally, according to Markit Credit Research. Market participants didn’t seem to pay any attention to neither Egypt or Europe, Wednesday.  However, the fear of contagion in both areas is still very much present.

“The contagion effect is still there, but was not as noticeable as it was last week.”

Gavan Nolan

The sovereign CDS spreads widen again today. The Markit iTraxx CEEMA index still underperformed the Markit iTraxx SovX Western Europe, giving back some of the ground it made up over the last few days. But elsewhere the market was directionless.

Omar Suleiman, the vice-president who has emerged as the apparent power-broker, warned that Egypt could face a disastrous coup if talks aren’t successful and disorder continues.

The protests in Cairo are entering their third week and the masses have now gathered outside parliament. And so far there has been little sign of the protest fatigue that the authorities appear to be counting on.

“The contagion effect is still there, but was not as noticeable as it was last week,” credit analyst Gavan Nolan writes in his daily summary.

The Markit iTraxx Senior Financials index bounced back after widening in the previous two days.

“The sovereign market had negligible impact, and the relatively thin liquidity in the index probably contributed to the swings, according to traders,” Markit reports.

Speculation that Axel Weber’s decision to not stand for a second-term as Bundesbank president, rules him out of the ECB presidency may also have helped peripherals. Weber is a vocal opponent of the ECB buying peripheral debt, and him leaving the race to succeed Trichet could be interpreted as a positive development for the euro zone stragglers.

But it is not clear that Weber has ruled himself out –  and even if he does,  it is not given that a more dovish candidate will become fill the position.

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  • Markit iTraxx Europe 96bp (+1), Markit iTraxx Crossover 396bp (+4.5)
  • Markit iTraxx SovX Western Europe 168bp (-3)
  • Markit iTraxx Senior Financials 159.5bp (-5), Markit iTraxx Subordinated Financials 272bp (-2.5)
  • Sovereigns – Greece 810bp (-3), Spain 234bp (0), Portugal 433bp (+9), Italy 173bp (0), Ireland 562bp (+4), Belgium 164bp (+2), France 88bp (+1)
  • Egypt 355bp (+18), Tunisia 175bp (+5), Morocco 170bp (+5), Saudi Arabia 107bp (-1), Bahrain 232bp (-2), Qatar 96bp (-1), Lebanon 350bp (-5), Israel 135bp (+3)

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