Credit Swap Indexes Trade After $17 Trillion Market Overhaul
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The biggest overhaul of the global credit derivatives market starts today with new benchmark index contracts addressing flaws that prevented some bondholders from being fully compensated for losses.
The shakeup of the $17 trillion credit-default swap market increases the cost of insuring junior bank bonds and sovereign debt because new terms provide greater protection. The Markit iTraxx Crossover Index of swaps linked to high-yield borrowers is also being broadened to reflect the growth of the junk bond market.