Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show

The risk of owning European corporate bonds rose, according to traders of credit-default swaps.

Contracts on the iTraxx Crossover Series 8 Index of 50 European companies with mostly high-risk, high-yield credit ratings increased 8.5 basis points to 346.5 basis points today, according to Deutsche Bank AG. The index, a benchmark for the cost of protecting bonds against default, rises when perceptions of credit quality worsen.

The iTraxx Europe index of 125 companies with investment- grade ratings rose 1 basis point to 42.5 basis points, Deutsche Bank prices show.

The CDX North America Investment-Grade Index Series 9 increased 6.75 basis points to 67.25 basis points at the close of trading in New York yesterday, according to Deutsche Bank.

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.

Credit-default swaps, contracts conceived to protect bondholders against default, 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.

asr-finance.com