By Abigail Moses - Aug 18, 2010 2:51 PM GMT+0800
The cost of insuring against losses on European corporate bonds was little changed, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings decreased 1 basis point to 489 basis points, according to JPMorgan Chase & Co. at 7:30 a.m. in London. The index is a benchmark for the cost of protecting bonds against default and a decline signals improvement in perceptions of credit quality.
The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was unchanged at 109.25 basis points, JPMorgan prices show. The Markit iTraxx Financial Index of 25 banks and insurers rose 0.25 basis point to 127.75.
A basis point on a credit-default swap contract protecting 10 million euros ($12.8 million) of debt from default for five years is equivalent to 1,000 euros a year.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.
To contact the reporter on this story: Abigail Moses in London at Amoses5@bloomberg.net
From Bloomberg, published on Aug 18, 2010 2:51 PM GMT+0800