Ritchie and facts

Japanese debt has become about the most expesnive in the world to insure.



The Bank of Japan\’s promise yesterday of a ¥15 trillion ($182 billion) cash injection into its banking system managed to soothe global equities, but not debt markets as Japanese government credit default swap rates used to insure against debt default soared 13 points to 92.


Greece’s credit default swaps fell by 60 basis points to 985 bps, with all other regional Eurozone states’ swaps falling with the exception of Ireland. (ANA-MPA) The yield spread between the 10-year Greek and German benchmark bonds eased below 940 basis points, from 965 bps early in the day.

Absolutely astonishing.

Insuring Japanese Government debt costs 10% of the cost of insuring Greek Government debt and this makes Japanese debt asbout the most expensive in the world in insure?

You mean that Japanese rates have risen to as much as twice German? Half Spanish?

My word!

Our Murph, never a man to let a fact come in the way of a good ol\’ rant.

5 thoughts on “Ritchie and facts”

  1. Let’s look at this even more simply, just as Sky News did last night.

    The interest rate the Greek government has to put on its bonds is over 10%

    The vig offered by the Japs? 1.9%

    If the Bubbles have to offer more than 5 times more return than the Nips just to get mugs to lend them cash, this tells me the markets rank Japan as a pretty low risk investment.

  2. I wonder how much of the reconstruction is going to be paid for by insurance claims under-written from Bermuda and other low-tax jurisdictions?

    So will Murphy and the other campaigners be complaining, saying that less money should be available for reconstruction because those insurers should have been taxed?

  3. “have to offer more than 5 times more return than the Nips just to get mugs to lend them cash”

    Most of the Japanese government bonds are funded by the Japanese citizenry themselves.

  4. Kay Tie

    Jap citizens, the gnomes of Zurich or the polar bears of Churchill Bay? Does it really matter? Personally I think not. Indeed as I understand things, it’s the identity of the borrower (and hence the likelyhood of being repaid) that determines the interest rate.

    The market says that people will lend to the Jap government at a return of 1.9% ie they view lending to the greys suited bureaucrats of Tokyo as relatively risk free.

    Lending to the schysters in Athens, on the other hand, is viewed as being akin to shoveling your pennies into a slot machine and pulling the handle in the hope of a return.

  5. Kay Tie still has a point, in that buyers aren’t necessarily rational.

    If most Japanese government borrowing involves borrowing from ordinary Japanese savers (which, AIUI, it does), then they almost certainly have a completely skewed view of risk, as well as a societal pressure to help the government – so the government can continue to borrow money from them indefinitely. That keeps JPY-denominated sovereign debt low, even if international investors think Japan’s the most terrifying risk in the world and wouldn’t touch it with a million-foot pole.

    Similarly, if nobody in Greece saves any money (other than gold under the mattress and Swiss francs in offshore accounts), which strikes me as probable, then the Greek government has no alternative but to borrow money from foreigners.

    Tim adds: As Adam Smith pointed out, people do have a propensity to prefer the domestic trade over the foreign…..

    It’s also true that given Japanese price deflation, lending your Yen to the Japanese Govt at these sorts of interest rates gets you something like 4% real returns. It’s a low nominal rate to be sure, but rather a high real one.

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