Bloomberg News

Sovereign, Corporate Bond Risk Rises, Credit-Default Swaps Show

January 06, 2012

Jan. 6 (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 jumped eight basis points to 383 at 3 p.m. in London, approaching the record 385 set Nov. 25. An increase signals deterioration in perceptions of credit quality.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 3.5 basis points to 293.5 and the subordinated index rose two to 530, according to JPMorgan Chase & Co.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 0.5 basis points to 757. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 1.25 basis points to 178.5.

A basis point on a credit-default swap protecting 10 million euros ($12.7 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

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

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