Surging UK CDS ahead of Scottish Referendum

by Ashraf Laidi
Sep 16, 2014 13:17

UK CDS continue gaining following the biggest weekly increase in over 2 years. The 5-yr CDS is testing its 200-DMA for the first time since June2013. The UK Treasury has sought to calm bond market fears by guaranteeing the Scottish part of UK debt in case a newly independent Scotland goes on with its threat to not honour its obligations of the UK debt.  Part of the decline in interest rate hike odds has emerged from anticipation that the BoE would be forced into its “lender of last resort” role during the uncertainty-filled period following a “yes” vote, and preceding the official independence. So, can the UK handle such guarantees one year after emerging from a triple dip recession and barely graduating from the school of austerity?

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Surging UK CDS ahead of Scottish Referendum - Cds Uk Sep 16 (Chart 1)

 

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