Bloomberg News

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

April 03, 2012

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

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments fell 2.5 basis points to 265.5 at 8:08 a.m. in London. A decline signals improvement in perceptions of credit quality.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 6.5 basis points to 603.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 1.75 basis points to 122.25 basis points.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell four basis points to 214 and the subordinated index declined seven to 350.

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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