Bond Risk Pares Decline in Europe, Credit-Default Swaps Show

The cost of insuring against losses on European corporate debt pared a decline after European Central Bank President Jean-Claude Trichet said the ECB’s bond- purchase program is “ongoing.”

Contracts on the Markit iTraxx Crossover Index of credit- default swaps on 50 companies with mostly high-yield credit ratings declined 10 basis points to 493.5, according to Markit Group Ltd. prices at 2:10 p.m. in London. The benchmark earlier fell as much as 18.7 basis points.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 1.55 basis points to 111.2, Markit prices show.

A basis point on a credit-default swap contract protecting 10 million euros ($13 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 borrower fail to adhere to its debt agreements. A decline signals improvement in perceptions of credit quality.

To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net