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Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show
The cost of insuring against default on European sovereign and corporate debt fell, according to BNP Paribas SA.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 14 governments fell 4.5 basis points to 225.5 at 7:56 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 12.5 basis points to 552.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 2.5 basis points to 127 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell 5.5 basis points to 202.5 and the subordinated index declined seven to 343.
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.