主题：【原创】新年政治经济展望之二：中美博弈（一） -- 井底望天

have Bloomberg terminal with me now. But we need specific numbers for a meaningful discussion.

sovereign CDS is not my expertise, though I can comment a bit on corporate credit ratings and corporate CDS.

BTW, sovereign/corporate/structured finance credit ratings use TOTALLY different measures/model/methodologies. My comments are just FYI.

BUT

1.Validity of measure: CDS is quite volatile, academic community also disputes CDS as a GOOD measure of true entity default risk. During the 2008 credit crisis, the CDS quote can rise from 200 to 400 or 600 (600bp=$600,000 insurance fee for $10m entity bonds) in one week and then fell back to 300 in one week.

It CAPTURES PANIC, NOT the default risk of one entity. My question: which quote will you pick: 200bp, 300bp or 600bp? (one-time peak).

2.Rating is DISCRETE, AAA does not mean absolute no risk of default. It just means that its default risk is below one threshold level.

3.Given that "sovereign/corporate/structured finance credit ratings use TOTALLY different measures/model/methodologies"--thus gross negligence in one field does not necessarily imply that all other ratings are gross. The 2006-2008 corporate ratings (which rely on a well-tested model from 1960s) turned out to be quite robust.

BTW, I heard from Mood's MD that they have lay off all their STRUCTURED-FINANCE staff after the humiliating debacle in structured-finance line of business. But there is little impact on corporate entity rating line.

Not sure about the sovereign rating line of business. But you might be right, given the more subjectivity nature in that business, domestic bias does exist.

4.Another way to measure default risk is to look at the treasury bond yields ACROSS A GROUP OF NATIONS.

Below are sovereign ratings and government bond yields (Based on this Friday data from bloomberg.com)

Ratings 2-year Treasury Note Yield

US AAA 78bp (0.78)

Germany AAA 111bp(1.11)

Canada AAA 117bp(1.17)

Italy AA- 169bp(1.69)

I picked Euro/US because their central bank fed fund rates are close after excessive rate cutting. I could not pick Australia/New Zealand for comparison due to the huge difference in terms of overnight Fed rate.

Here, if US does not deserve AAA rating, then Germany and Canada should lose AAA rating too.

In sum, The bond market data are NOT in favor of your argument.