Which Government Debt Issuers Are Most Likely to Default?

Posted Dec 20th 2009 3:40PM by Connie Madon
Filed under: International Markets, Forecasts, Market Matters, Politics

Investors in developing countries no doubt wonder which countries that issue debt are safe and which ones could default. CMA Datavision, a subsidiary of CME, has put together the "Sovereign Risk Monitor."

The Risk Monitor uses five-year credit default swaps (CDSs) and ranks the countries according to volatility. It uses the percent of change to determine the ranking of these countries. The new index is called the cumulative possibility of default (CPD). If, for example, a country has a 20% CPD, it has a one in five chance of defaulting in the next five years. Also included is their most recent credit rating.

Here are the top ten countries, as ranked by CMA Datavision:

Venezuela: CPD 56.26%, credit rating BB- negative outlook
Ukraine: CPD 52.91%, credit rating CCC+ stable outlook
Argentina: CPD 46,06%, credit rating B- stable outlook
Pakistan: CPD 38.11%, credit rating B- stable outlook
Republic of Latvia: CPD 30.47%, credit rating BB negative outlook
Dubai UAE: CPD 25.71%, credit rating BB+ negative outlook
Iceland: CPD 24.66%, credit rating BBB- negative outlook
Lithuania: CPD 19.11%, credit rating BBB negative outlook
California, USA: CPD 18.97%, credit rating Baaa1, stable outlook
Greece: CPD 18.67%, credit rating BBB+

While there may be some very promising investment opportunities in the above listed countries, it would be prudent to weigh the pros and cons against the backdrop of this data. You may decide to pass up all investments in these countries. You may decide that the risks outweigh the rewards and look for opportunities in other developing countries.

However you use this data, it's helpful to keep it in front of you when searching for the best investments.

In which developing countries would you invest, if any?

Tags: CDS, CMA, CME, countries likely to default, CPD, credit default swaps, Dubai, Greece, Iceland, inthenews, Sovereign Risk Monitor, Venezuela

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Reader Comments (Page 1 of 1)

12-20-2009 @ 9:27PM

ij70 said...

In that list only Ukraine and Argentina looks good.

12-21-2009 @ 2:29AM

Brian Hasbrouck said...

Great post! I was trying to figure out what CPD meant and the CNBC site didn't really explain it. I've llinked to this posting over at my site. Thanks!

http://tr.im/prisk

12-21-2009 @ 5:11PM

william lindblad said...

CPD = More Voodoo. Anyone that is willing to project 5 years out should not be listened to.

Besides, it is 9 countries as Cal. is still a State.

Iceland is there because of their bankers. The Ukraine looks more like a new era of British colonialism and actually, quite stable. Something called the Steppes, which is now overrun with Brits. They are there for the money and if history is an indicator, they will get it.

If I were interested in foreign investment I would go with the Ukraine, esp. in the ag. sector.