Corporate, Sovereign Bond Risk Falls, Credit-Default Swaps Show
The cost of insuring against default on European corporate and sovereign debt fell, according to BNP Paribas SA.
The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly high-yield credit ratings dropped 7.5 basis points to 637.5 at 8:45 a.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings declined one basis point to 136.5 basis points. A decrease signals improvement in perceptions of credit quality.
Contracts on the Markit iTraxx SovX Western Europe Index of 15 governments fell one basis point to 278.5.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell 2.5 basis points to 239.5 and the subordinated index dropped five to 395.
A basis point on a credit-default swap protecting 10 million euros ($13.2 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.