Italy, Spain lead in­crease in Euro­pean sov­er­eign credit risk

The Pak Banker - - Company& -

MADRID: Italy and Spain led an in­crease in the cost of in­sur­ing bonds sold by Europe's pe­riph­eral na­tions as di­vi­sions emerged over how best to limit con­ta­gion from the re­gion's bud­get deficit cri­sis.

Credit-de­fault swaps on Italy rose 10 ba­sis points to 219 while Spain in­creased 10.5 ba­sis points to 307.5, ac­cord­ing to data provider CMA. The Markit iTraxx SovX Western Europe In­dex of swaps on 15 gov­ern­ments rose 6.25 ba­sis points to 183. Euro­pean Union of­fi­cials are at odds over whether to in­crease the 750 bil­lion-euro ($1 tril­lion) bailout fund as they meet in Brus­sels to­day. Di­vi­sions ap­peared last week when a plan to buy govern­ment bonds only won sup­port from an "over­whelm­ing ma­jor­ity" of mem­ber states and an ex­ten­sion of liq­uid­ity mea­sures was en­dorsed by "con­sen­sus," ac­cord­ing to Euro­pean Cen­tral Bank Pres­i­dent Jean-Claude Trichet. "Both un­der­score the po­lit­i­cal con­tro­versy in Europe re­gard­ing these mea­sures," Mau­reen Schuller, a credit strate­gist at ING Groep NV in Am­s­ter­dam, wrote in a note to in­vestors. "This, in our opin­ion, will re­main the sin­gle most im­por­tant source of credit mar­ket volatil­ity." Swaps on Ire­land were 13.5 ba­sis points higher at 556 and Por­tu­gal was up 10 to 438, ac­cord­ing to CMA. Sov­er­eign con­cerns also un­der­mined in­vestor per­cep­tions of fi­nan­cial cred­it­wor­thi­ness with con­tracts on Spain's biggest len­ders lead­ing an in­crease in bank bond risk. -PB News

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