Bloomberg News

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

December 28, 2011

Dec. 28 (Bloomberg) -- The cost of insuring against default on European sovereign and corporate 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 decreased five basis points to 749 at 11:30 a.m. in London. A decline signals improvement in perceptions of credit quality.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell one basis point to 171 basis points.

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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