Sovereign Debt Risk Little Changed in Europe, Credit Swaps Show
By Abigail Moses - May 20, 2011 10:15 AM GMT+0200 Fri May 20 08:15:06 GMT 2011
The cost of insuring government and corporate debt was little changed in
Europe, according to traders of credit-default swaps.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 2 basis points to 186.
Contracts on Greece rose 3 basis points to 1,325, Ireland fell 2 to 625 and Portugal declined 1 to 624, while Italy decreased 1.5 to 152.5 and
Spain was unchanged at 247.
The Markit iTraxx Crossover Index of 40 companies with mostly high-yield credit ratings rose 1 basis point to 358 and the Markit iTraxx Europe Index of 125 companies with investment- grade ratings held at 98.
The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 1 basis points to 142.5 and the subordinated index was 3 higher at 242.
A basis point on a credit-default swap protecting 10 million euros ($14.3 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)