Banks Flush With ECB Cash Outperform Sovereigns: Credit Markets

Banks are beating euro governments in credit markets by the most on record as European Central Bank loans stave off punitive borrowing costs for lenders such as BNP Paribas SA and UniCredit SpA facing debt downgrades.

The Markit iTraxx Financial Index of credit-default swaps linked to the senior debt of 25 European banks and insurers now costs a record 120.5 basis points less than the Markit iTraxx SovX Western Europe Index of swaps on 15 governments. That compares with a 28 basis-point gap at the end of November and a previous high of 118 in July. Historically, it costs more to insure banks than governments.