While there are a number of states in fiscal hot water these days, it seems like California is generally assumed to be in the most trouble. But that view is incorrect, according to the market. Credit-default swaps, derivatives that act as insurance on a bond default, indicate that investors are even more worried about Illinois. Its credit-default swap prices have soared to $330,000 this month. Darrell Preston at Bloomberg reports:

Insuring Illinois against default now costs more than that for California, the lowest-rated U.S. state according to Standard & Poor's. Covering the most-populous state's general- obligation debt averaged $291,000 in December, Bloomberg data show. S&P ranks California at A-, its fourth-lowest investment grade, and Illinois at A+, two levels higher.

Read the full story at Bloomberg.

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