Italy Leads Surge in Sovereign Debt Risk to Record on Contagion
July 11th, 2011Via: Bloomberg:
The cost of insuring against default on Italian government debt surged to a record, leading an increase in a gauge of European sovereign debt risk to an all- time high on concern the region’s crisis is spreading.
Credit-default swaps on Italy surged 32 basis points to 283, according to CMA prices at 12:30 p.m. in London. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments climbed 33 basis points to a record 289. An increase signals deteriorating perceptions of credit quality.
Investors are betting that Italy may be engulfed by the crisis that forced international bailouts of Greece, Ireland and Portugal. European finance ministers are meeting today in Brussels to seek ways to shore up Greece and defend the region’s other heavily indebted nations.
“It’s a very nervous market and there’s a big fear out there that this crisis could spread from the stressed periphery to the rest of periphery,” said Padhraic Garvey, head of developed-market debt at ING Groep NV in Amsterdam. “Until we get a plan in place, financial markets will speculate and extrapolate the worst-case scenario.”
