Reply #3: Yes, but note the low CDS spread for the US. Nobody's betting on default. [View All]

[leveymg]

CDS spread is like odds on a horse. A spread of 30 basis points means that the odds are long that default will actually occur, so nobody's offering much of a risk premium. Contrast that with Iceland (638) that actually did default recently on its sovereign debt.

Here's how Wiki explains it:

The "spread" of a CDS is the annual amount the protection buyer must pay the protection seller over the length of the contract, expressed as a percentage of the notional amount. For example, if the CDS spread of Risky Corp is 50 basis points, or 0.5% (1 basis point = 0.01%), then an investor buying $10 million worth of protection from AAA-Bank must pay the bank $50,000 per year. These payments continue until either the CDS contract expires or Risky Corp defaults.