Sept. 16 (Bloomberg) -- The cost of insuring againstdefault on European bank bonds fell, heading for the biggest-ever weekly decline as politicians meet in Poland to discussefforts to contain the region’s debt crisis. The Markit iTraxx Financial Index of credit-default swapson the senior debt of 25 banks and insurers dropped 13 basispoints to 248, down from 300 basis points Sept. 9, according toJPMorgan Chase & Co. at 11 a.m. in London. The subordinatedindex fell 27 basis points to 445, compared with 535 last week. European finance ministers are meeting in Wroclaw, Poland,today and tomorrow on how to resolve the euro-area’s deepeningdebt crisis. The European Central Bank said yesterday itcoordinated with other central banks to extend dollar loans toeuro-area institutions, adding fuel to a four-day rally that hassent insurance costs tumbling from records set Sept. 12. “The market has actually got more positive as the week hasprogressed as the European situation seems for now to have beenpulled back from the brink,” Jim Reid, head of fundamentalstrategy at Deutsche Bank AG, wrote in a note to investors. German Chancellor Angela Merkel said today that Germany must make its contribution to help the common currency. Euro countries must pursue budget consolidation to help the regionmove away from a “debt union,” she said in a speech in Berlin.
Sovereign Risk Falls
The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments declined nine basis points to319, and is headed for the biggest weekly drop in seven weeks. Adecline signals improvement in perceptions of credit quality. Contracts on Belgium dropped 10 basis points to 246, Francedeclined five to 164 and Germany was one lower at 82, accordingto CMA. Contracts on Ireland tumbled 11 basis points to 793,Italy fell 11 to 441, Portugal was 13 lower at 1,046 and Spainwas down 6 at 367. Swaps on the Markit iTraxx Crossover Index of 40 companieswith mostly high-yield credit ratings decreased 18 basis pointsto 696. The Markit iTraxx Europe Index of 125 companies withinvestment-grade ratings fell 4.75 basis points to 169. A basis point on a credit-default swap protecting 10million euros ($13.8 million) of debt from default for fiveyears is equivalent to 1,000 euros a year. Swaps pay the buyerface value in exchange for the underlying securities or the cashequivalent should a borrower fail to adhere to its debt agreements.
Sovereign Risk Falls
The Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments declined nine basis points to319, and is headed for the biggest weekly drop in seven weeks. Adecline signals improvement in perceptions of credit quality. Contracts on Belgium dropped 10 basis points to 246, Francedeclined five to 164 and Germany was one lower at 82, accordingto CMA. Contracts on Ireland tumbled 11 basis points to 793,Italy fell 11 to 441, Portugal was 13 lower at 1,046 and Spainwas down 6 at 367. Swaps on the Markit iTraxx Crossover Index of 40 companieswith mostly high-yield credit ratings decreased 18 basis pointsto 696. The Markit iTraxx Europe Index of 125 companies withinvestment-grade ratings fell 4.75 basis points to 169. A basis point on a credit-default swap protecting 10million euros ($13.8 million) of debt from default for fiveyears is equivalent to 1,000 euros a year. Swaps pay the buyerface value in exchange for the underlying securities or the cashequivalent should a borrower fail to adhere to its debt agreements.
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