The City is betting the UK Government is more likely to default on its debts than the country's leading High Street bank.

The latest swings in the credit default swaps (CDS) markets reveal that City traders believe Government debt is more risky than that of HSBC. Credit default swaps are effectively insurance premiums on the non-payment of debt.

The cost of insuring gilts - the bonds sold by the Treasury - have risen to £12,400 per £1 million, or 1.24%, Financial News reports. That is 10 basis points above the cost of credit default swaps for HSBC's corporate bonds.

HSBC has been one of the great survivors of the credit crunch. The London-based bank has had little exposure to the American mortgage market fiasco and, unlike most of the rest of the High Street banks, has not had to be bailed out by the Government.

That bailout and the raising of £33 billion of Government debt to stand behind the £250 billion commitments to the banking sector has caused the increased in CDS cover on gilts, said analysts.