Sovereign, Corporate Bond Risk Falls, Credit-Default Swaps Show
The cost of insuring against default on European sovereign and corporate debt fell, according to data compiled by Bloomberg.
The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments dropped 3.5 basis points to 281 at 9:40 a.m. in London. A decrease signals improving perceptions of credit quality.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 13 basis points to 678. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings dropped 3.5 to 146 basis points.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined six basis points to 257 and the subordinated index dropped 7.5 to 414.5.
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.