Bloomberg News

Sovereign Bond Risk Falls in Europe, Credit-Default Swaps Show

November 18, 2011

Nov. 18 (Bloomberg) -- The cost of insuring against default on European sovereign debt fell, according to traders of credit- default swaps.

The Markit iTraxx SovX Western Europe Index dropped nine basis points to 349 at 10 a.m. in London. A decline signals improvement in perceptions of credit quality.

Swaps on Italy tumbled 20 basis points to 543 and Spain declined 15.5 to 462, after both reaching records this week, CMA prices show. Belgium decreased nine basis points to 330, France was six lower at 221 and Germany was down one at 95, while Ireland fell eight to 723 and Portugal declined 16 to 1,064.

The cost of insuring corporate debt also fell, according to JPMorgan Chase & Co. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased four basis points to 758.5 basis points.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down 0.75 at 188.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers declined 0.5 basis point to 300 and the subordinated gauge was nine lower at 531.

A basis point on a credit-default swap protecting 10 million euros ($13.5 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

To contact the editor responsible for this story: Paul Armstrong at

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