Bloomberg News

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

March 01, 2012

The cost of insuring against default on European sovereign and corporate debt rose, according to BNP Paribas SA.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed five basis points to 347 at 8 a.m. in London. An increase signals deterioration in perceptions of credit quality.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 13.5 basis points to 578.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3.5 basis points to 131.5 basis points.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased 4.5 basis points to 211 and the subordinated index jumped 12 to 363.

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.

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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