What Countries Are Likely to Default?

CMA, the credit information specialist, released its quarterly Sovereign Risk Report in December gauging the risks of default throughout nations around the world. The CMA is a subsidiary of the CME Group and uses data from over 30 swap market participants to calculate the five-year cumulative probability of default (CPD). The percentages below represent the likelihood that the country will default within 5 years. Entering 2010, financial professionals need to know which countries are most likely to encounter problems in the coming years.

The World's Riskiest Sovereign Debt Country 5-Year CPD Venezuela 57.7% Ukraine 54.6% Argentina 49.1% Latvia 30.1% Iceland 25.4% Dubai 25.1% Lithuania 19.3% Greece 17.4% Romania 17.2% Lebanon 17%

The World's Safest Sovereign Debt Country 5-Year CPD Norway 1.4% Germany 1.9% Finland 2.1% France 2.2% Netherlands 2.5% Denmark 2.6% USA 2.9% Australia 3.2% Belgium 3.8% Switzerland 3.9%

Notable movement for the quarter:

USA & UK see mounting concerns over debt to GDP ratios now 75% and 97%, respectively. USA & UK CDS spreads widen 66% and 77%, respectively.

Greece sees worst performing CDS globally.

Germany sees 5.5% tighter spreads.

Romania widens 41% after being denied access to IMF funding due to political crisis.

Dubai skyrockets after requesting standstill agreement from creditors. Abu Dhabi widens by 53.5% in turn.

South Korea and Hong Kong tighten 15.4% and 13.8%, respectively. Hong Kong overtakes Japan as tightest CDS spread in Asia.