Greece, Portugal Sovereign Credit-Default Swaps Jump to Records
By Abigail Moses - Apr 21, 2011 10:44 AM GMT+0200
Thu Apr 21 08:44:46 GMT 2011
The cost of insuring debt sold by
Greece and
Portugal rose to records on concern
Europe’s sovereign crisis is worsening.
Credit-default swaps on Greece jumped 25 basis points to 1,324 basis points according to CMA, signaling a 67.4 percent chance of default within five years. Portugal rose 2 basis points to 640.
That helped push the Markit iTraxx SovX Western Europe Index of swaps on 15 governments 5 basis points higher to 193, the highest since January. The gauge is up from 157.5 basis points April 8, the lowest in five months.
Contracts on Ireland increased 5 basis points to 628, while Italy rose 2 to 151 and Spain climbed 2.5 to 245, CMA prices show. An increase signals deterioration in perceptions of
credit quality.
The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers was unchanged at 132 basis points, and the subordinated index held at 234, according to JPMorgan Chase & Co.
The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings fell 1 basis point to 364 and the Markit iTraxx Europe Index of 125 companies with investment- grade ratings rose 0.5 to 99.25, JPMorgan prices show.
A basis point on a credit-default swap contract protecting 10 million euros ($14.5 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.
(Bloomberg)