Bloomberg News

Sovereign, Company Bond Risk Fall in Europe, Credit Swaps Show

December 13, 2011

Dec. 13 (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 linked to 15 governments dropped three basis points to 379 at 4:30 p.m. in London. A decline signals an improvement in perceptions of credit quality.

The Markit iTraxx Crossover Index of swaps on 50 companies with mostly high-yield credit ratings dropped five basis points to 788.5, according to JPMorgan Chase & Co. The Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings declined one to 184.75.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers decreased 5.5 basis points to 320 and the subordinated index was little changed at 567.5.

A basis point on a credit-default swap protecting 10 million euros ($13.1 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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