by Bespoke Investment Group
During the dark days of the financial crisis, we created the Bespoke Bank and Broker CDS (credit default swap) index that tracks default risk for the financial sector. With the equity market taking a step back over the past week, we wanted to see if financial default risk has begun to pick up. Below is a chart of our Bank and Broker CDS index going back to the start of 2009. We also include the the S&P 500 Financial sector in the chart.
While default risk for the financial sector has remained stubbornly higher than levels it was at back in late 2009/early 2010 (when equity prices were lower than they are now), it hasn't gone up much at all over the past week. At least for now, the market pullback hasn't caused a rush to buy protection in the form of credit default swaps.
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