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Which Countries Have The Highest Default Risk: A Global CDS Heatmap

We hardly need to expound on Greece's near-death economic state: if anyone has missed the surreal tragicomedy of the pas 5 years all we can say is we envy you. Of all countries around the globe, if there is one nation where everyone by now knows is, or should have defaulted long ago, it is the Hellenic Republic.

But when it comes to default risk implied by government bond prices and their inverse "hedge", credit default swaps, few may be aware that Venezuela's default probability is orders of magnitude higher. Of course, our readers will be well aware of this: back in December, when its CDS was trading at "only" 2300 bps (or whatever points upfront equivalent it was back then) we said Venezuela CDS are going much, much wider. Little did we know that in just about 8 months they would more than double, and as of last check, Venezuela CDS are just shy of 5000bps suggesting a default is virtually guaranteed.

So aside from these two socialist utopias, who else is on the default chopping block? The CDS heatmap below lays out all the countries which according to the market, are most likely to tell their creditors the money is gone... it's all gone.

Below, in order of declining default risk, are the ten most likely to follow Venezuela and Greece into the great default unknown:

  1. Ukraine
  2. Pakistan
  3. Egypt
  4. Cyprus
  5. Russia
  6. Brazil
  7. Kazakhstan
  8. Turkey
  9. South Africa
  10. Vietnam

And which are the three countries least likely to default? No surprise, these are Germany, Switzerland, and Sweden. The US is 4th least risky.

Source: Bank of America