Bad Comedy

Governments implying prices fall because of collusion as opposed to unsusutainable debt levels, widespread mendacity and malfeasance, or unforseen sovereign risk.

Governments apparantly want "orderly" markets that allow them to issue as much debt as they wish without impunity or adverse consequences, and for market participants who risk capital to simply ignore that the Emperor has no clothes.

Governments around the world (the U.S. included as I note the Justice Department is investigating FX transactions by several large Hedge Funds, with questionable jurisdiction, for suspicion of colluding to drive down the Euro) acting like children and lashing out at "unfairness".

There are $9 billion of Greek sovereign CDS outstanding relative to $406 billion of government bonds -- too little to put pressure on the debt price according to Citi bank analysts.

"Targeting rules specifically at CDS could be made legally effective but would be very unlikely to have any material effect," said Simon Gleeson, a partner at Clifford Chance.

"It also raises the larger issue of the extent to which it is appropriate or sensible to seek to use regulation to manipulate markets," Gleeson added.

Banning naked sales of CDS would be more complicated than the introduction of curbs and disclosure rules on shorted shares and costlier for the holder.

If a CDS buyer decided to sell the underlying bond he was forced to buy, he would then have to close out the contract which could be at a big loss.