According to Fortis the risk premium of U

On the eve of the meetings of the Bank of England and the European Central Bank (ECB), the perception of risk has never been as strong. Yesterday, a symbolic cap has been crossed on the credit of companies: the index which measures the risk associated with speculative bonds is passed over the 1,000 points. As a comparison, the Itraxx Crossover did not reach 600 points at the end of September.

"The market is frightened by the succession of disastrous economic indicators and he expected no rapid effects of the support measures announced by the authorities," says Juan Esteban Valencia, in Société Générale. The bad news have indeed made Wednesday, with an index showing a net contraction in the services in the United States in November and the destruction of jobs in the larger than expected U.S. private sector.

The credit market implicitly suggests that the situation is as critical as the great depression. According to Fortis, the risk premium of U.S. high-yield bonds includes a scenario of default rates by 32 per year for a 40 recovery. This rate was 15.3 in the 1930s. "The relationship that existed between the risk premium hedge credit and default rates is currently broken, summarizes Mickael Benhaim, Pictet." The number of actual failures is very remote from these scenarios.

Three high risk sectors

In fact, the rating agency Moody's provides a rate of 8 per cent a year in the United States and Europe. To date, it does not exceed 1 on the Continent. The Fitch Agency indicates, for its part, do not doubt the marking of all business: Agency considers indeed that it could degrade the note of 30 of the companies instead of 10 on average in recent years.

Three areas are particularly exposed, according to Fitch: automotive, media and construction materials. More generally, it is interesting to note that the perception of risk is again higher than on the obligations of non-financial businesses and those of banks and insurers. Generalist companies risk premium, measured by the difference in performance with state borrowing soared yesterday over 340 points, more than 280 points to the financial sector, on the maturity between five and seven years.

The guarantees made by States to the debt of the banks have helped mitigate fears about this segment of the market. They had hit a peak in the month of October: the bonus had reached 347 points while that of non-financial businesses did not exceed 300 points.

But this commitment of the States for banks has also consequences: it resulted in a transfer of risk. Now, the debt of countries appears more risky than before. As shown in a study of Morgan Stanley, the TOS ("collateralized debt obligations") on State bonds increased as the Government announced measures to help the financial sector.

Another way to see: in the matter, the risk associated with banks eroded that States (see chart). With a CDS over 100 basis points, the probability of a failure of the debt of the United Kingdom is implicitly of 8 over five years and 16 over 10 years with a 40 recovery. The risk is about two times lower for the debt of the France.