The risk of European companies defaulting on their debt rose, according to traders of credit- default swaps.
Contracts on the iTraxx Crossover Index of 50 European companies with mostly high-risk, high-yield credit ratings increased 4 basis points to 394 basis points, 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 63 basis points, Deutsche Bank prices show.
A basis point on a credit-default swap contract protecting 10 million euros ($14.8 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.
articles-in-stockmarket.com
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