It’s clear the CDS market, even after the AIG bailout, still needs more scrutiny and transparency, not to mention regulating—look how procyclical it is, as the Journal reports:

The credit-default swaps on debt of Greece and Portugal soared, indicating more worries about a default, investors became more alarmed. That often sets off a cycle of more CDS buying. Prices of government bonds issued by Spain and Portugal sank along with their stock markets, while the cost to insure these bonds against default using credit-default swaps soared.

All good stuff.

I’d just point out that the bond market problems really moved to prominence only when the stock market caught on.

Global Markets Shudder

Doubts About U.S. Economy and a Debt Crunch in Europe Jolt Hopes for a Recovery

Many readers would assume, correctly, that the “markets” in the Journal headline refers only to stocks. Hopefully soon, we’ll all know better.

Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at