Bloomberg News

Sovereign, Corporate Credit-Default Swap Indexes Rise in Europe

October 13, 2011

Oct. 13 (Bloomberg) -- The cost of insuring against default on European sovereign and corporate debt rose, according to traders of credit-default swaps.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 10 basis points to 330 at 3 p.m. in London. An increase signals deterioration in perceptions of credit quality.

The Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 20 basis points to 762, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose six basis points to 178.5.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers climbed 13.5 basis points to 245.5 and the subordinated index rose 12 basis points to 480.

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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