The decline in European CDS has been really sharp starting from the day the ECB promised a new LTRO for the end of 2014, but is this trust justified or are we seeing an excess of confidence ?
The following chart comes from Trueconomics and it’s going to make you think:
These are the 5 years CDS spreads for the worse economies of the Euro Area (Greece, Portugal, Spain, Ireland and Italy).
The change in only 12 months (especially during the last weeks) is really evident and we are not sure whether it’s a “healthy” growth of confidence or not.
It seems like only Portugal and Greece have still a rather high risk of default, while Ireland, Spain and Italy look fine. How correct is this view ?
Remember: the market is always right, even when it’s wrong.