Bloomberg News

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

April 13, 2012

The cost of insuring against default on European corporate and bank debt fell, according to traders of credit-default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings dropped 0.5 basis point to 639.5 as of 8:25 a.m. in London, according to BNP Paribas SA prices. A decline signals improvement in perceptions of credit quality.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers fell one basis point to 235 and the subordinated index declined two basis points to 383. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was little changed at 134.25 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

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