“What Are You Paying For?!” One Bank Asks Whether French CDS Is Worthless
I've gotta tell you, the French election risk story just gets better and better. Or, depending on how one looks at it, worse and worse.
I've already documented the rather disconcerting fact that thanks in part to post-crisis deleveraging in Germany, French IG credit now comprises something like a quarter of the € IG market. Put simply: hedging a potential redenomination event entails trying to figure out how to protect against a catastrophe in €410 billion worth of French corporate bonds. O
“Marine Le Pen and her pledge to restore France’s “monetary sovereignty” is so dangerous (not to mention bats*t crazy),…”
Is it crazy because of potential effects, or as a concept? Doesn’t seem like a crazy concept to me, nor the growing anti-EU movements of late apparently. Not sure they care about effects, as I’ve said before, because a great many of them think it needs to break (for real) in order to fix it. A small portion of them would like to speed up the process.
While such jarring proposals are market risks, warning against the pain seems like warning a drug addict that rehab is crazy because the withdrawals.
Besides, I get the sense that you’d enjoy the epic capital swirl all of this craziness would precipitate; so what gives? And don’t give me the ol’ mom and pop will suffer bit…because plenty of that will happen regardless of which misled camp of collectivists have their hands on the levers. Populism is just the latest and most potent catalyst.
the global financial system will collapse if France defaults on €1.7 trillion in debt. French investment grade debt makes up 23% of THE ENTIRE € investment grade debt market. redenomination would be akin to a quarter of the €IG universe defaulting. she can’t be allowed to do that. it would be catastophic.