Bloomberg News

U.S. Credit Swaps Fall as Cyprus Works to Unlock Bailout

March 22, 2013

A gauge of U.S. corporate credit risk fell as Cyprus said it entered the final stages of talks with international creditors to receive a rescue package.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, eased 0.7 basis point to a mid-price of 90.6 basis points at 8:48 a.m. in New York, according to prices compiled by Bloomberg.

Cypriot lawmakers are debating proposals needed to obtain a bailout after they rejected a plan by the 17 euro-area finance ministers to tax bank deposits. The European Central Bank, which makes up the troika along with the International Monetary Fund and the European Commission, will cut off emergency funding to Cyprus’s banks at the end of March 25 unless there is a deal, threatening to deepen Europe’s debt crisis.

The credit-swaps index typically falls as investor confidence improves and rises as it deteriorates. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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