Downgrade Doubles Default Gap to New Zealand: Australia Credit

Australia’s credit market advantage to New Zealand increased to the highest level in more than two years after Standard & Poor’s stripped the smaller nation of its AAA local currency rating.

Credit-default swaps insuring Australian bonds for five years traded at 100.5 basis points on Oct. 5, 23 basis points less than the price to guard against a default by New Zealand, according to CMA. The gap was the widest since July 2009 and compares with an average of 11 basis points over the past year.