Portugal, Greece Bond Risk Falls From Record, Credit Swaps Show
By Abigail Moses - Jul 8, 2011 9:59 AM GMT+0200 Fri Jul 08 07:59:31 GMT 2011
The cost of insuring against default on government debt of
Portugal and
Greece fell from records, according to traders of credit-default swaps.
Contracts on Portugal dropped 29 basis points to 949 and
Greece fell 46 basis points to 2,104, according to CMA prices at 8:30 a.m. in London. A decline signals improvement in perceptions of credit quality.
The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 2 basis points to 248 basis points.
The Markit iTraxx Crossover Index of contracts linked to 40 companies with mostly high-yield credit ratings decreased 2 basis points to 408, according to JPMorgan Chase & Co.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings fell 0.25 basis points to 108.75 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was unchanged at 163.5 basis points and the subordinated index held at 289.5.
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.