Corporate Bond Risk Falls in Europe, Credit-Default Swaps Show
The cost of insuring against losses on European corporate bonds fell, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 5.5 basis points to 462.5, according to JPMorgan Chase & Co. prices at 7:30 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a decline signals improvement in perceptions of credit quality.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.25 basis points to 106.25, JPMorgan prices show.
A basis point on a credit-default swap contract protecting 10 million euros ($13.3 million) of debt from default for five years is equivalent to 1,000 euros a year.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
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