Bloomberg News

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

June 10, 2011

June 10 (Bloomberg) -- The cost of insuring against default on government debt sold by Greece, Portugal and Ireland rose to records, according to traders of credit-default swaps.

Contracts on Greece soared 45.5 basis points to 1,567.5, Portugal increased 11 to 730 and Ireland jumped 20 to 710 as of 4 p.m. in London, according to CMA. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 10 basis points to 211.5, the highest since Jan. 11.

Swaps on Spain rose 14 basis points to 275, Italy increased 9 basis points to 174 and Belgium was up 8 at 153 basis points, according to CMA. France rose 5 basis points to 275. An increase signals deterioration in investor perceptions of credit quality.

The cost of insuring corporate debt also increased. The Markit iTraxx Crossover Index of swaps on 40 companies with mostly high-yield credit ratings jumped 11 basis point to 401, while the Markit iTraxx Europe Index of 125 investment-grade companies rose 3 basis points to 108.75, according to JPMorgan Chase & Co.

The Markit iTraxx Financial Index of swaps linked to the senior debt of 25 European banks and insurers rose 7.5 basis points to 167.5 and the subordinated index soared 11 to 288, JPMorgan prices show.

A basis point on a credit-default swap protecting 10 million euros ($14.4 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: Michael Shanahan

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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