A fresh sign of the deterioration in credit market conditions emerged Wednesday when one of the most closely watched barometers of sentiment broke through a key threshold. The Markit iTraxx Crossover index rose above 1,000bp for the first time since its creation in 2004, implying a record number of companies are on the verge of default. The index, which measures the cost of protecting junk-grade companies against default, has risen sharply in the past month amid growing concerns about whether companies will be able to refinance their debt. The index, composed of 50 mostly junk-rated companies in Europe, rose 60bp to highs of about 1,020bp on Wednesday. On Nov 1 it was trading at about 700bp, or a cost of €700,000 to insure €10m of debt annually against default over five years. Before the credit crunch it was below 200bp. Meanwhile, the main CDS indicator in the US, the Markit CDX North American Investment Grade index of 125 companies, rose to 271bp. On Nov 20 it traded at a record 284bp. Japan’s iTraxx index is trading at record levels of 365bp.

This entry was posted by Gwen Robinson on Thursday, December 4th, 2008 at 5:51 and is filed under Capital markets. Edit this entry.