Bloomberg News

Corporate, Government Credit-Default Swaps Decline in Europe

April 17, 2012

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

The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings fell 10.5 basis points to 669.5 at 10:20 a.m. in London. The Markit iTraxx Europe Index of 125 companies with investment- grade ratings dropped two basis points to 142 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 one basis point to 249 and the subordinated index dropped one to 406.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments declined three basis points to 2279.

A basis point on a credit-default swap protecting 10 million euros ($13.1 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: Katie Linsell in London at klinsell@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at Parmstrong10@bloomberg.net


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