The cost of insuring European sovereign and corporate debt against default using credit default swaps jumped higher in early trading Friday, as the intensifying euro-zone debt crisis and fears of a global slowdown hit financial markets around the world.
The SovX Western Europe index, which investors can use to buy or sell default protection on a basket of 15 sovereign borrowers, was 12.5 basis points wider at 305/311 basis points, according to index owner Markit.
CDS function like a default insurance contract for debt. A widening of one basis point in a five-year CDS spread equates to a $1,000 increase in the annual cost of protecting $10 million of debt for five years.
For more: Europe Default-Insurance Costs Soar - MarketBeat - WSJ
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