Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show
The cost of insuring against default on European sovereign and corporate debt rose, according to traders of credit-default swaps.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased three basis points to 367 basis points at 8 a.m. in London. 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 were 10 basis points higher at 737, according to JPMorgan Chase & Co.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose two basis points to 173.75 basis points.
A basis point on a credit-default swap protecting 10 million euros ($12.7 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.