Brazil Credit Default Swap spread at its highest level in 6 months

RIO DE JANEIRO, BRAZIL – With the increase in the risk premium in local markets, as in the exchange and in the future interest markets due to lower demand for risk assets abroad, Brazil’s risk measured by the spread of five-year contracts of credit default swap (CDS) is at its highest levels since April.

On October 6, the indicator stood at 208 base points, stable compared to Monday’s closing, according to IHS Markit data. The Brazilian five-year CDS has been operating above the 200-point level since September 24.

The last time the CDS was this high was on April 15, when the country risk measured by the indicator reached 209 points. At that time, market agents were tense with respect to negotiations involving the 2021 Budget.

The Brazilian CDS’ upward trend toward the peaks of recent months is in line with what has been observed in other emerging countries. Mexico’s five-year CDS, for instance, although unchanged in comparison to Monday’s closing, has remained above 100 points since September 28, at 102 points at the moment – the peak since April 13, when the indicator stood at 103 points.

Meanwhile, South Africa’s country risk is currently at 219 points, from 218 points the day before, the highest level since May 4, when it reached 222 points. Turkey’s CDS remains at higher levels, at 437 points, from 438 on Monday.

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