Bloomberg News

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

June 12, 2012

The cost of insuring against default on European sovereign and corporate debt rose.

The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments increased two basis points to 323, according to data compiled by Bloomberg at 8:24 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 climbed five basis points to 706. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose one basis point to 181 basis points.

The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was two basis points higher at 290 and the subordinated index was up five at 467.

A basis point on a credit-default swap protecting 10 million euros ($12.5 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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