Bloomberg News

Corporate, Sovereign Credit-Default Swaps Decline in Europe

November 30, 2011

Nov. 30 (Bloomberg) -- The cost of insuring against default on European corporate and sovereign debt fell, according to traders of credit-default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped three basis points to 788.5 basis points, according to JPMorgan Chase & Co. at 11:30 a.m. in London. A decline signals improved perceptions of credit quality.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was down 1.75 at 194 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers dropped six basis points to 325 and the subordinated gauge was down 10 at 565.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments dropped 12 basis points to 356 basis points.

A basis point on a credit-default swap protecting 10 million euros ($13.3 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: Paul Armstrong

To contact the reporter on this story: Michael Shanahan in London at Mshanahan3@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


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