Bloomberg News

Sovereign, Corporate Credit-Default Swap Indexes Fall in Europe

October 10, 2011

Oct. 10 (Bloomberg) -- The cost of insuring against default on European sovereign and corporate debt fell, according to traders of credit-default swaps.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments dropped seven basis points to 324 at 3:30 p.m. in London. A decline signals improvement in perceptions of credit quality.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 32.5 basis points to 781, according to JPMorgan Chase & Co.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 9.75 basis points to 179.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 11.5 basis points to 240.5 and the subordinated index dropped 19 to 483.

A basis point on a credit-default swap protecting 10 million euros ($13.7 million) of debt from default 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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