This is pretty amazing stuff - CDS on 5-year Treasuries, which only yield about 1.8%, are trading at 1%.
International investors are now willingly giving up 1% of the annual return on 5-year Treasury notes to buy insurance against a default by the Treasury. A year ago, they only had to pay 0.05%. This means that the risk of default on these securities has multiplied 20 times. In fact, the cost of insurance against a default on Treasuries is now more than that for the average AAA or AA security! The rating agencies wouldn't dare say so, but the insurers who have to put their money where their mouth is think US Treasuries are in the single-A category.