Citadel CEO worried by rising cost of US default insurance

By Carolina Mandl and Davide Barbuscia

NEW YORK (Reuters) -Citadel's founder and CEO Ken Griffin said on Thursday it is "unfathomable" that a financial instrument to protect against an eventual U.S. default is being priced at levels close to some European countries.

"I never thought in my life I would see the U.S. priced higher in risk cost than a number of countries like Spain, Germany or France," he said at the Forbes Iconoclast Summit. "You gotta be kidding me."

Griffin said the credit default swap (CDS) market has some issues with liquidity which impact prices, but still he considered that conversations around how close the swaps are trading are "unfathomable."

Spreads on U.S. five-year CDS - market-based gauges of the risk of a sovereign default – stood at 48 basis points on Thursday, compared to 50 bps for Italy, 32 bps for Spain and 35 bps for France, S&P Global Market Intelligence data showed.

U.S. sovereign CDS spreads widened to their highest since the debt ceiling crisis of 2023 in recent weeks.

The move in the spreads of U.S. credit default swaps comes amid concerns around the country's fiscal deficit and negotiations over a tax bill that is estimated to add more than $2 trillion to the U.S. debt.

Griffin did not specifically comment on the bill, but criticized the U.S. fiscal deficit.

"The United States' fiscal house is not in order. You cannot run deficits of six or 7% at full employment after years of growth. That's just fiscally irresponsible," he said.

(Reporting by Carolina Mandl and Davide Barbuscia in New York; additional reporting by Svea Herbst-Bayliss; Editing by Jan Harvey)

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