Corporate Credit Risk Increases to Three-Week High in Europe, Swaps Show

The cost of insuring against losses on European corporate bonds rose to the highest level in more than three weeks, according to traders of credit-default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings increased 1.5 basis points to 515, according to JPMorgan Chase & Co. at 9:30 a.m. in London, the highest since July 21. The index is a benchmark for the cost of protecting bonds against default and a rise signals deterioration in perceptions of credit quality.

The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 1.25 basis points to 114.5, JPMorgan prices show. The Markit iTraxx Financial Index of 25 banks and insurers was unchanged at 132.

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.