Bank Bond Risk Rises in Europe After Dexia Shares Are Suspended
May 27, 2011, 6:15 AM EDTBy Abigail Moses
May 27 (Bloomberg) -- The cost of insuring against default on European bank debt rose after Belgium’s stock market regulator suspended trading of Dexia SA.
The Markit iTraxx Financial Index of credit-default swaps on the senior debt of 25 banks and insurers climbed 3 basis points to 160 as of 10:30 a.m. in London, the highest since March 15, according to JPMorgan Chase & Co. Swaps tied to Belgian government debt were also affected, climbing 7.5 basis points to a 2 1/2-month high of 158.5, according to CMA.
Dexia, the lender to local governments that was rescued by France and Belgium in 2008, said it will hold a conference call at about noon Brussels time after the regulator halted trading without giving a reason.
The Markit iTraxx SovX Western Europe Index of 15 governments increased 2 basis points to 201.
A basis point on a credit-default swap protecting 10 million euros ($14.2 million) of debt 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 and an increase signals a deterioration in investor perceptions of credit quality.
--Editors: Paul Armstrong, Andrew Reierson
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net
To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net
