Bloomberg News

Sovereign, Company Bond Risk Rises, Credit-Default Swaps Show

May 02, 2012

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

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments climbed 3.5 basis points to 277.5 at 9:15 a.m. in London. An increase signals deterioration in perceptions of credit quality.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 12.5 basis points to 640.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose two to 138.5.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers increased two basis points to 236 and the subordinated index rose 0.5 to 392.5.

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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