Corporate Bond Risk Increases in Europe, Credit-Default Swap Prices Show
The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 6.5 basis points to 505, according to Markit Group Ltd. at 7:20 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and an increase signals a deterioration in the perception of credit quality.
The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 1.5 basis points to 111, Markit prices show.
A basis point on a credit-default swap protecting 10 million euros ($12.7 million) of debt from default for five years is equivalent to 1,000 euros a year.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
To contact the reporter on this story: Michael Shanahan in London mshanahan3@bloomberg.net
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