Bloomberg News

Corporate, Bank Bond Risk Falls in Europe, Default Swaps Show

March 23, 2012

The cost of insuring corporate and bank debt fell in Europe, according to credit-default swaps prices.

The Markit iTraxx Crossover Index of swaps linked to 50 companies with mostly high-yield credit ratings dropped 5.5 basis points to 592.5 as of 8:27 a.m. in London, according to BNP Paribas SA. The gauge had risen each day since a new series of the index started on March 20.

The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers dropped 1.5 basis points to 203.5, snapping three days of increases, while a gauge of subordinated debt risk fell 3.5 basis points to 319.5, BNP Paribas prices show.

The Markit iTraxx SovX Western Europe Index of swaps on 15 governments fell 1.5 basis points to 277.5 after climbing for the past two days.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was unchanged at 117 basis points.

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 and editor responsible for this story: Paul Armstrong in London at Parmstrong10@bloomberg.net


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