France, Spain Default Risk Rises to Records

The cost of insuring against default on French and Spanish government bonds rose to records, according to traders of credit-default swaps.

Swaps on France climbed six basis points to 207 as of 3 p.m. in London, surpassing the record closing price of 203.5 on Nov. 10, according to CMA. Contracts on Spain climbed 21 basis points to a record 441.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose eight basis points to 342. Belgium jumped 14 to an all-time high of 320 and Italy was 30 higher at 555. An increase signals deterioration in perceptions of credit quality.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings rose 21 basis points to 743.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings increased 6.25 to 179.5 basis points.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 12.5 basis points to 279.5 and the subordinated gauge was 17 higher 510.

A basis point on a credit-default swap protecting 10 million euros ($13.6 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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