Credit-default swaps insuring government and company debt rose after a contraction in manufacturing in Europe and China triggered concern the global economy will slow.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 10 basis points to 280, according to BNP Paribas SA prices at 10:41 a.m. in London. An increase signals worsening perceptions of credit quality.
A measure of euro-region manufacturing fell to 47.7 in March from 49 last month as German and French factory output unexpectedly shrank, while U.K. retail sales fell more than economists forecast in February as households curtailed spending. A Chinese manufacturing gauge slipped to a four-month low of 48.1 in March, HSBC Holdings Plc and Markit Economics data show.
“Despite the relative positive developments of the debt crisis and regained confidence shown by financial markets, industrialists still face the negative effects of a very uneven scenario for demand,” Annalisa Piazza, a fixed-income analyst at Newedge Group in London, wrote in a note.
The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings increased 20.5 basis points to 590.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings advanced 2.25 basis points to 116.25 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 13 basis points to 203 and the subordinated index jumped 14.5 to 326.5, BNP Paribas data show.
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.