Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show
The cost of insuring against default on European sovereign bonds rose, according to traders of credit-default swaps.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 1 basis point to 284 at 1:30 p.m. in London. An increase signals deterioration in perceptions of credit quality.
Swaps on Italy jumped 8 basis points to 291, according to CMA. Belgium increased 3 basis points to 188, Ireland climbed 9 to 1,073 and Portugal rose 10 to 1,096, while Spain was 12 higher at 326. Greece dropped from a record, falling 70 basis points to 2,280.
The cost of insuring corporate debt rose. The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings increased 2 basis points to 443, according to JPMorgan Chase & Co.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 0.5 basis point to 118.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 2.5 basis points to 178.5 and the subordinated index rose 2 to 312.5.
A basis point on a credit-default swap protecting 10 million euros ($14.2 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.
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