How to price credit risk, of course, raises the question of what pricing BHP Billiton could achieve, if it does decide to undertake a domestic bond issue. One possible benchmark is the current spread on BHP's five-year CDS, which is 60 basis points.It must be said that it seems very unlikely that the domestic market would accept a spread of just 60 bps for five-year BHP credit risk. And this raises the question of just how good is the CDS market at pricing credit risk.The fact is that the CDS market should be very good at pricing credit risk. In the case of BHP, it is an international market and it is a much deeper and more liquid market. An argument can be made that the credit spreads on bonds should be wider to compensate for their relative illiquidity. But if the CDS market can accurately price credit risk, how can UK sovereign risk CDS spreads of 80 bps, last week, be explained? Admittedly, UK sovereign risk has deteriorated as a result of the fall-out from the GFC and the rating agencies have warned that its 'AAA' credit rating is at risk, but is there really less chance of 'A+' rated BHP defaulting than the UK government?Fortunately for the US government, its CDS spread last week was only 37 bps (the same as Australia's, at the time of writing) so it remains a better risk than BHP but not, it seems, than Berkshire Hathaway (AA+) or Procter & Gamble (AA-), which both recently issued bonds at yields less than equivalent US Treasury bonds. Furthermore, yields on US interest rates swaps are at or below those on equivalent US Treasury bonds. In other words swap spreads are flat or negative, depending on the term to maturity.Swap spreads are not negative in Australia but it can be argued that this is simply a case of supply and demand. With interest rates at historically low levels in the United States and expected to stay that way for some time yet, there is simply no demand to fix interest rates by entering into a swap.In that case, was it simply investor demand that drove in the yield on the Berkshire Hathaway and Procter & Gamble bonds or is there simply too much government paper in the market? And of course, there is so much more to come.