Investors are taking increasingly bearish bets on Germany and France, suggesting they believe Europe’s crisis could spread to the monetary union’s stronger members.
The cost of protecting German government bonds against default surged to a fresh record this week. Credit default swaps reached almost 122 basis points on Tuesday, meaning it would cost the equivalent of $122,000 annually to insure $10m worth of German paper for five years.
Buying CDS protection on Germany can equate to betting that it will have to pick up the tab for bailing out Europe’s so-called peripheral nations, analysts say.
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