Corporate, Sovereign Bond Risk Falls, Credit-Default Swaps Show

The cost of insuring against default on European corporate and sovereign debt fell, according to data compiled by Bloomberg.

The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped six basis points to 638 at 10:10 a.m. in London. The measure is up from 613 basis points at the start of the month.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined 0.5 basis point to 137 basis points. A decrease signals improvement in perceptions of credit quality.

Contracts on the Markit iTraxx SovX Western Europe Index of 15 governments fell 0.5 basis point to 273.5. The guage has risen 4.5 basis points this month.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell two basis points to 240.5 and the subordinated index dropped four to 399.5.

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.

To contact the reporter on this story: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net

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