Sovereign Credit-Default Swap Index Falls From Record in Europe

The cost of insuring against default on European sovereign debt fell from a record closing price, according to traders of credit-default swaps.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments dropped 12 basis points to 373 at 3 p.m. in London. Contracts on Belgium and France fell from record closing prices, while Spain and Germany also decreased. A decline signals improved perceptions of credit quality.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers dropped 28 basis points to 330 and the subordinated gauge tumbled 42 to 573, both down from all-time highs, according to JPMorgan Chase & Co.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings fell 42 basis points to 792.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down eight at 197.25.

A basis point on a credit-default swap protecting 10 million euros ($13.4 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.

To contact the reporter on this story: Abigail Moses in London at Mshanahan3@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net