Crumbling relations

Sovereign risk has dominated the financial markets this year. The fallout from Greece’s fiscal woes has shaken confidence in European sovereign bonds, once considered to be the safest of investments. The five countries affected most – Portugal, Ireland, Italy, Greece and Spain, which together have been given the somewhat pejorative acronym Piigs, saw their sovereign debt spreads balloon in January as investors were gripped with fear of a contagion spreading across the markets. Credit default