Bloomberg reports today that the cost of protecting corporate bonds from default surged to a record on concern Argentina and Pakistan may default, worsening global economic turmoil.  Swaps on the benchmark Markit iTraxx Crossover Index surged above 800 basis points for the first time, and they rose 9 points on the CDX North America Investment Grade Index of contracts that is linked to 125 companies in the U.S. and Canada.

In Argentina, President Cristina Kirchner’s planned takeover of pension funds heightened concern the government is headed for its second default this decade.  The probability the country will fail to meet its commitments has soared to 94 percent.  And in Pakistan, even the possible bailout by the IMF (a meeting was scheduled for today in Dubai) may not be enough to save it from [another] credit-rating cut according to Standard & Poor’s, which already cut the nation’s debt rating on Oct. 6 to CCC+, seven levels below investment grade.  Bloomberg notes as well that “Pakistan is also expected to seek financial support from the ‘Friends of Pakistan’ group, which is due to meet next month in the United Arab Emirates.  The group, which was established last month to help Pakistan stabilize its economy, includes the U.S., U.K., China and Saudi Arabia.”  Meanwhile, the country suffers from increased political instability due to omnipresent volatility in its lawless [FATA] tribal region which provides cover to legions of Islamic militants including Taliban from both Pakistan and Afghanistan, as well as al-Qaeda fighters.