BEIRUT: Lebanon’s CDS spreads widened in 2011, particularly during the first and second quarter, due to the deterioration of political conditions in the country as well as turmoil across the Middle East and North Africa.

Figures released by credit default swaps (CDS) and bond pricing firm CMA Datavision show that spreads on five-year CDS for Lebanon ended the fourth quarter of 2011 at 447.5 basis points, widening by 17.8 bps from 429.7 bps at the end of the third quarter, 96.5 bps from 351 bps at the end of the second quarter and by 99.8 bps from 347.7 bps at the end of the first quarter of 2011. As such, Lebanon’s five-year CDS spreads widened by 149.4 bps in 2011 compared to 28.5 bps in 2010, as reported by Lebanon This Week, the economic publication of the Byblos Bank Group.

The firm said that Lebanon’s CDS spreads widened by just 4.1 percent in the fourth quarter, compared to the worst performers during the quarter, such as Greece, which posted a widening of 56.8 percent, followed by Slovenia with 46.3 percent, Egypt with 34.7 percent, Slovakia with 23.8 percent and Sweden with 22 percent.

Further, CMA Datavision indicated that Lebanon ended the fourth quarter of 2011 with a five-year cumulative probability of default (CPD) of 27.6 percent, deteriorating from 26.6 percent at the end of the third quarter, 22.2 percent at the end of the second quarter and 21.9 percent at the end of the first quarter of 2011.

It said the CPD quantifies the probability of an issuer being unable to honor its debt obligations over a given time period. It added that the CPD is a function of the market’s recovery level, which varies according to several factors and distance to default. It calculates the CPD using an industry standard model and proprietary credit data.

Lebanon’s CPD at end-December shows that Lebanese debt was less risky than 14 other sovereigns such as Dubai (28 percent), India (30.2 percent), Italy (34.9 percent), Egypt (36.3 percent), Ukraine (45.5 percent), Portugal (60.8 percent) and Greece (93.8 percent). Norway, the U.S. and Finland had the lowest CPDs among the 68 sovereigns covered in the survey, with rates of 3.9 percent, 4.3 percent and 5.9 percent, respectively.

Further, the firm maintained Lebanon’s rating at “CMA_bb” in the fourth quarter of 2011, which is based on its proprietary CMA Implied Ratings methodology. It did not upgrade any sovereign in the region during the fourth quarter.