Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show
The cost of insuring against default on European sovereign and corporate debt fell for the first time in four days, according to BNP Paribas SA.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments decreased 1.5 basis points to 354.5 at 8:15 a.m. in London. A decline signals improvement in perceptions of credit quality.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 8.5 basis points to 609.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.25 basis points to 140.25 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell four basis points to 222.5 and the subordinated index declined five to 365.
A basis point on a credit-default swap protecting 10 million euros ($13.2 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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