Insurance on Credit Default Swaps now cost are way up relative to the value of US Govt debt covered

US Financial World is upside down. Insurance cost $ 18,000 on $ 10,000,000 of US Govt debt

Cost of US loans bail-out emerging
By Krishna Guha, Michael Mackenzie,and Nicole Bullock
from Financial Times
September 10 2008 00:34The price of credit default swaps on five-year US government debt hit a record 18 basis points in early trading, according to CMA Datavision. This means that it costs $18,000 a year to buy insurance on $10m of US government debt.

Tim Backshall, chief strategist at Credit Derivatives Research, said the price implied that the US was more likely to default on its obligations than Japan, Germany, France, Quebec, the Netherlands and several Scandinavian countries. Traders said the CDS market for US debt was illiquid and it was hard to see evidence of increased concern over US creditworthiness in broader market prices. (Give it some time and we might be able to add Venezuela, Argentine, Trinidad and Tabago to that list - Jesse)

The price of US government bonds rose and yields fell across the board, as concern over the economic outlook overwhelmed any rise in perceived credit risk. Jay Mueller, senior portfolio manager at Wells Capital Management, said: “We are seeing flight-to-quality buying of Treasuries.”