Spreads in the gargantuan credit default swaps marketplace are forcing otherwise platinum rated borrowers to pay significantly more for their money. A bit of this is to be expected – up until summer credit spreads were tighter than a snare drum, and some widening was to be expected. But nobody foresaw GE paying 129 basis points over the government yield (they’re probably more credit worthy THAN the government).
Will the anomaly work itself out in due course…?
“The credit-default swap market is completely distorting reality,” said Henner Boettcher, treasurer of Heidelberg Cement in Heidelberg, Germany, the country’s biggest cement maker. “Given what these spreads imply about defaults, we should be in a deep depression, and we are not.”
Or should there be a “Yet.” at the end of the above statement?