Corporate Bond Market Picks Up

December 13, 2010

This week’s chart(s) of the week show the exposure that German, French, and UK Banks have to the debt of Portugal, Ireland, Greece, and Spain (PIGS). The top chart shows the Total Exposure that the German, French, and UK Banks have to debt of the PIGS countries. This includes Government debt, Private debt (both household and Corporate), and the value of any derivative contracts held by the banks of the respective countries. The middle chart shows the exposure that the German, French, and UK Banks have to the Government Debt of the PIGS countries. The bottom chart shows the exposure that the German, French, and UK Banks have to the Government & Bank Debt of the PIGS countries.

These charts help to explain why Germany, France, and the UK (the 3 biggest Euro area economies) were so eager to help bail out the governments of Greece and Ireland (thus far). Had the EU not stepped in to help Greece and Ireland, they likely would have defaulted on their debt, which would likely have required the German, French, and UK governments to bailout their banks (the “stress tests” that the European banks recently went through did not include the possibility of a sovereign default).

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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