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

The cost of insuring against default on European corporate debt fell, according to traders of credit- default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 10.5 basis points to 762, according to JPMorgan Chase & Co. at 7:30 a.m. in London. A decline signals improved perceptions of credit quality.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down 3.25 at 176 basis points.

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. 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: Michael Shanahan in London at Mshanahan3@bloomberg.net

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