U.S. Treasury default bets surge, hit new record

The price of Credit Default Swaps on US Treasuries has been steadiliy increasing for the last six months. A year ago they traded at only 15 basis points and today they are 82 basis points. The world, rightfully so, believes that US debt is becoming more risky.-Lou

U.S. Treasury default bets surge, hit new record

NEW YORK, Feb 4 (Reuters) - Rising U.S. government borrowing has a growing number of investors betting on a potential default by the Treasury down the line, according to credit default swaps data on Wednesday. According to CMA DataVision, five-year U.S. CDS spreads stood at 82 basis points on Wednesday, having closed on Tuesday at a record 85.9 basis points. As a result, it currently costs $82,000 a year to protect $10 million of U.S. debt.

That is up tenfold from levels seen a year ago and even more from the negligible levels that were common before the credit crisis. The CDS market is used to hedge against the possibility of sovereign and corporate defaults, and has played a controversial role in exacerbating the credit crisis.