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

The cost of insuring against default on Greece, Ireland and Portugal rose above record closing prices, according to traders of credit-default swaps.

Greece climbed 12 basis points to 1,622, Ireland increased 3 to 743 and Portugal was 5 higher at 767, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 2 basis points to 216.

The cost of insuring European corporate bonds fell. Contracts on the Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings decreased 7 basis points to 399, according to JPMorgan Chase & Co. at 12:30 p.m. in London. A decline signals improvement in perceptions of credit quality.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.75 basis points to 108.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined 1.5 basis points to 164 basis points, and the subordinated index rose 1.5 to 289.

A basis point on a credit-default swap protecting 10 million euros ($14.4 million) of debt from default for five years is equivalent to 1,000 euros a year. 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.

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

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