[T]he report found that "the CDS [Credit Default Swaps] spreads for the more troubled countries seem to be low relative to the corresponding bond yield spreads, which implies that CDS spreads can hardly be considered to cause the high bond yields for these countries".This is, of course, completely in opposition to what the EUrocrats, most notably Mrs. Merkel and Mr. Sarkozy (not to mention Mr. Juncker and El Presidente) maintain.
It concludes: "All in all, the analysis... shows that the differences in bond and CDS spreads across countries are justified. Government deficits, debt levels and current account deficits give a consistent picture of vulnerabilities."
Th cute thing about this story is that the report was unearthed by our own Het Financiële Dagblad (NL), who are also mirroring the report here (pdf).
But it is a bit worrying that the FD had to go through all the hoopla of the EUnion equivalent of a Freedom Of Information request. All this to get a report that had been commissioned aleady back in March of this year. Apparently, the reluctance to release the report comes from the EC's perceived prejudice against hedge funds.
Michel Barnier, the EU financial services chief, said: "We know well that there are risks in this immense and opaque market for derivatives... My response as a politician is to say: 'Stop'. Shine the spotlight on those people who can manipulate."But they were wrong. The report they commissioned said so. And that is why it had to be buried.
He was backed by Nicolas Sarkozy, the French President, and Angela Merkel, German Chancellor, who said some bets against government bonds should be banned amid a resurgence of "strong volatility".
Kudos to Het Financiële Dagblad for not letting the EUnion get away with this.