Corporate Bond Risk Falls in Europe on Greek Resolution Bets

The cost of insuring European
corporate debt fell on speculation the region’s finance
ministers will finalize a 130 billion-euro ($171 billion) Greek
bailout at a meeting today.

Contracts on the Markit iTraxx Crossover Index of credit-
default swaps on 50 companies with mostly high-yield credit
ratings decreased for a third day, falling 21.5 basis points to
575, according to JPMorgan Chase Co. at 9:30 a.m. in London. A
decline signals improvement in perceptions of credit quality.

Politicians are scrambling to resolve differences so that
Greece won’t default on 14.5 billion euros of debt maturing
March 20. German Chancellor Angela Merkel, Greek Prime Minister
Lucas Papademos and Italian premier Mario Monti on Feb. 17
expressed confidence that ministers will resolve open questions.

“Investors seem to be expecting a positive outcome
tonight,” said Harpreet Parhar, a strategist at Credit Agricole
SA in London. “The risk of disappointment is not negligible.”

The Markit iTraxx Europe Index of 125 companies with
investment-grade ratings fell six basis points to 130.5 basis
points. The Markit iTraxx Financial Index linked to senior debt
of 25 banks and insurers decreased nine basis points to 213.5
and the subordinated index dropped 15 to 365.

The Markit iTraxx SovX Western Europe Index of swaps on 15
governments declined for a second day, falling two basis points
to 336.

A basis point on a credit-default swap protecting 10
million euros 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.

To contact the reporter on this story:
Abigail Moses in London at
amoses5@bloomberg.net

To contact the editor responsible for this story:
Paul Armstrong at
parmstrong10@bloomberg.net

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