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Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show

The cost of protecting European corporate bonds from default fell, according to traders of credit-default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 6 basis points to 505, according to JPMorgan Chase & Co. at 7:30 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a decline indicates improvements in the perception of credit quality.

The Markit iTraxx Europe index of 125 companies with investment-grade ratings dropped 1.75 basis points to 109.25, JPMorgan prices show.

A basis point on a credit-default swap protecting 10 million euros ($13.1 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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