Bloomberg News

Greece, Portugal, Ireland Credit-Default Swaps Surge to Records

June 09, 2011

June 9 (Bloomberg) -- The cost of insuring against default on government debt sold by Greece, Portugal and Ireland surged to records, according to traders of credit-default swaps.

Contracts on Greece soared 30 basis points to 1,522, Portugal increased 16 to 722 and Ireland rose 10 to 690 as of 2:30 p.m. in London, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments rose 4 basis points to 203, the highest since Jan. 12.

Swaps on Spain increased 6.5 basis points to 261.5, Italy climbed 6 basis points to 165 and Belgium was 4 basis points higher at 144, according to CMA. An increase signals a deterioration in investor perceptions of credit quality.

The cost of insuring corporate debt also rose. The Markit iTraxx Crossover Index of swaps on 40 companies with mostly high-yield credit ratings increased 2 basis points to 395, the highest since March 17, while the Markit iTraxx Europe Index of 125 investment-grade companies rose 1 basis point to a five- month high of 107.25, according to JPMorgan Chase & Co.

The Markit iTraxx Financial Index of swaps linked to the senior debt of 25 European banks and insurers climbed 4.5 basis points to 163.5 and the subordinated index jumped 10 to 278, both the highest since March, JPMorgan prices show.

A basis point on a credit-default swap protecting 10 million euros ($14.5 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.

--Editor: Paul Armstrong

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


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