Colin Barr

Following the money in banking, economics, and Washington

U.S. bank credit spreads widen

November 29, 2010: 1:06 PM ET

Ripples from the Irish bailout are showing up all over the globe.

The biggest reaction is in Europe, where the prices of Spanish and Portuguese bonds fell again and the price of protecting against a default on Belgian debt surged 13% (see CMA chart, right).

A panic sprouts in Brussels

Credit default swap spreads also soared on Dexia, the biggest Belgian bank, which is operating with state support thanks to a 2008 bailout by the governments of Belgium, Luxembourg and the Netherlands. Dexia isn't the basket case that Ireland's banks are, but it is almost twice as large, by assets, as Belgium's economy, raising a question or two about what anyone might do should it run into funding trouble again.

U.S. bank stocks are flattish Monday, with the KBW banks index up fractionally. But the CDS spreads on big U.S. lenders such as Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) all rose 3% or 4% Monday.

It is only one day, and who knows what might be behind it. It could be questions about the giant U.S. banks in light of the euro mess, but it could also be tied to the mortgage fiasco or any number of other things.

In any case, as Janney Montgomery Scott's Guy LeBas noted last week, it is a trend well worth watching.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for since November 2007. Previously he was a writer and editor for, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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