Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show
The cost of insuring against default on European sovereign and corporate debt rose, according to BNP Paribas SA.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments added 1.5 basis points to 275.5 at 3 p.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 climbed 5.5 basis points to 650.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 140.5 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was 0.5 basis point higher at 242.5 and the subordinated index increased one to 401.
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.