Tuesday 18 January 2011

Tunisia Revolt Spurs Surge in Region's Credit-Default Swaps - Bloomberg

Investors are insuring against contagion across North Africa after Tunisian President Zine El Abidine Ben Ali was forced to flee the country following protests against rising food costs, unemployment and corruption.

The CHART OF THE DAY shows credit-default swaps insuring government debt from Morocco to Egypt have surged to the highest levels since July 2009. Contracts on Tunisia climbed to 184 basis points from 120 at the start of the year, while contracts on Egypt jumped to 307.5 from 237 and Morocco rose to 159 from 125, CMA prices show.

“If things were to get out of hand, you have the risk of broader contagion that starts to impact banking exposures,” said Vivek Tawadey, head of European credit strategy at BNP Paribas SA in London. “The risk is it moves further eastward. As things currently stand, we believe that this is a localized event which should correct over time.”

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