Bloomberg News

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

March 13, 2012

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

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 13.5 basis points to 571.5 at 7:54 a.m. in London. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell three basis points to 131.5 basis points. A decline signals improvement in perceptions of credit quality.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell five basis points to 210 and the subordinated index declined eight to 352.

A basis point on a credit-default swap protecting 10 million euros ($13.2 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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