Cyprus Deposit Raid Stokes Senior Bond Concerns: Credit Markets
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Europe’s unprecedented tax on Cyprus bank deposits is raising concern among holders of senior bank bonds that they’ll be made to take losses should another country need rescuing.
The Markit iTraxx Financial Index of credit-default swaps insuring senior debt of 25 banks and insurers rose as much as 19 basis points to 162 basis points yesterday, according to prices compiled by Bloomberg. That’s the biggest jump since Aug. 2, before the European Central Bank steadied markets by announcing its bond-buying program, and the gauge is now at the highest in almost three weeks.