Lower CDS Indicates Economic Recovery for Iceland

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Lower CDS Indicates Economic Recovery for Iceland

The credit default swap (CDS) for the Icelandic state has now dropped to 200 points and has not been lower since many months before the banking collapse in October 2008. The CDS has been in constant decline since January and indicates growing faith in Iceland’s economy.

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The Icelandic króna. Copyright: Icelandic Photo Agency.

In its report on the CDS, visir.is quotes information from the website keldan.is, which again is based on information from vb.is, Bloomberg and CMA.

It is also stated that the offshore exchange rate of the Icelandic króna is now down to ISK 215 for each euro purchased, which is consistent with the conclusion of the Central Bank’s tenders for foreign currency in exchange for ISK which was presented yesterday.

A CDS of 200 points means that two percent of the nominal value of a five-year commercial paper must be paid to secure it against nonpayment.

Meanwhile, Statistics Iceland reports that Iceland’s gross domestic product (GDP) increased by two percent in real terms between the fourth quarter of 2010 and the first quarter of 2011.

At the same time the national expenditure increased by 5.1 percent, which can mostly be explained by significant increase of supply. Private consumption dropped by 1.6 percent and investment by 6.8 percent, but public consumption increased by 0.1 percent.

Export was reduced by 8.2 percent and import by 4.1 percent in the same period, as stated on Statistics Iceland’s website.