Corporate credit risk jumped for an eighth day in Europe amid signs of renewed splits about how to solve the debt crisis, while the approach of Hurricane Sandy to the U.S. eastern seaboard stymied bond issuance.
The Markit iTraxx Crossover Index of credit-default swaps on 50 mostly junk-rated European companies rose eight basis points to 543 at 11:11 a.m. in London, extending its longest run of increases since August 2011. Bond sales were limited to re- openings of existing transactions, with Carrefour Banque SA, the finance unit of the French supermarket chain, and the European Investment Bank raising money, according to people familiar with the offerings.
Former Italian premier Silvio Berlusconi cast fresh doubt over the future of incumbent Mario Monti this weekend by threatening to withdraw his party’s support from the government. Hurricane Sandy barreled toward New York City with 70-mile-per- hour winds, keeping bankers from their desks and prompting the Securities and Exchange Commission to close down stock trading.
“People are being drawn back to the political risk again in Italy after Berlusconi’s comments,” said Harpreet Parhar, a credit strategist at Credit Agricole SA in London.
Spanish gaming company Codere SA and French telecom provider Alcatel Lucent SA were the worst performers in the iTraxx Crossover index, rising 8 percent and 3 percent, respectively, according to prices compiled by Bloomberg. In the investment-grade market, the Markit iTraxx Europe index of 125 companies climbed three basis points to 132, the highest since Oct. 10, Bloomberg prices show.
Credit-default 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. A basis point on a contract protecting 10 million euros ($13 million) of debt from default for five years is equivalent to 1,000 euros a year.
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