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Credit Risk Climbs for Second Day in Europe to Highest in Week

The cost of insuring corporate bonds against losses climbed for a second day in Europe, rising to the highest in a week.

The Markit iTraxx Europe Index of credit-default swaps linked to 125 investment-grade companies increased two basis points to 74.5 basis points, the highest since Feb. 13, according to data compiled by Bloomberg.

Europe’s recovery showed signs of cooling this month, with indexes of manufacturing and services both coming in weaker than economists forecast. China’s manufacturing dropped to a seven-month low in February, according to a private index, fueling concerns that emerging market economies will slow as the Federal Reserve withdraws stimulus measures.

“There’s an increasing degree of nervousness with the combination of problems in emerging markets and recent figures showing a weaker growth outlook for the global economy,” said Simon Ballard, a strategist at National Australia Bank Ltd. in London. “People are playing closer to home, maybe taking some chips off the table.”

The World Bank and the Asian Development Bank are both in the market today, according to people familiar with the transactions who asked not to be named because they’re not authorized to speak about them.

The World Bank, which makes loans for capital projects in developing countries, is marketing a benchmark deal in pounds maturing in December 2016. The bonds will yield about 30 basis points more than U.K. gilts, the people said.

ADB Deal

The Asian Development Bank, which like the World Bank has the top AAA grades from all three biggest ratings firms, is selling $500 million floating-rate notes due February 2018, according to the people. The bonds are expected to price tomorrow.

The European Investment Bank added 250 million euros ($342 million) to its floating-rate bonds due January 2018, pricing the debt to yield 2.5 basis points more than the three-month euro interbank offered rate. The new bonds will bring the size of the deal to 2.9 billion euros.

Erste Abwicklungsanstalt, or EAA, set up to remove toxic assets from WestLB AG’s balance sheet, set the price of a benchmark three-year bond in dollars at 22 basis points over midswaps, people familiar said.

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