Corporate credit risk fell to the lowest in more than four years in Europe as policy makers’ plans for more economic stimulus pushed borrowing costs down to a record.
The cost of insuring against losses on company debt dropped, with the Markit iTraxx Europe index of credit-default swaps on 125 companies with investment-grade ratings declining one basis point to 65 basis points at 8:02 a.m. in London. Contracts on an index of junk-rated bonds approached the lowest since July 2007.
European Central Bank President Mario Draghi signaled last week there would be fresh monetary stimulus in June, and another interest-rate cut may top the list of options. Average yields on investment-grade corporate bonds dropped to an all-time low of 1.7 percent, according to Bank of America Merrill Lynch index data.
“There are a lot of expectations that the ECB will act,” said Harpreet Parhar, a London-based strategist at Credit Agricole SA. “Whatever they do it will take us one step closer to quantitative easing. The tone of the market is positive.”
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