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

The cost of insuring against default on European sovereign and corporate debt rose for a third day, according to BNP Paribas SA.

The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments soared 9.5 basis points to 356.5 at 4:20 p.m. in London, the highest since Jan. 16. 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 increased 24.5 basis points to a two-week high of 615.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 6.5 basis points to 141.5 basis points.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers jumped 11 basis points to 225.5 and the subordinated index soared 17 to 371.

A basis point on a credit-default swap protecting 10 million euros ($13.1 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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE