March 17 (Bloomberg) -- The cost of protecting European corporate bonds from default increased on concern rising credit card delinquencies at American Express Co. reflect a deepening credit crisis, according to traders of credit-default swaps.
Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 21 basis points to 1,091, according to JPMorgan Chase & Co. prices at 11:23 a.m. in London. The index fell from a record 1,173 basis points on March 5 as European stocks staged a five-day rally. With the unemployment rate in the U.S. headed toward 10%, credit card companies may loose as much as $75 billion in 2009, according to a BNP Paribas SA report today. American Express Co., the biggest credit-card company by purchases, yesterday reported a rise in 30-day delinquency rates to 5.3 percent and Chief Executive Officer Kenneth Chenault said the financial environment was among the harshest we have seen in decades. Climbing credit card delinquency rates in the U.S. have stopped the rally dead in its tracks, said Jeroen van den Broek, head of credit strategy at ING Groep NV in Amsterdam. This identifies the lack of spending power present in the U.S. consumer. Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase signals a deterioration in the perception of credit quality. A basis point on a credit-default swap contract protecting 10 million euros ($13 million) of debt from default for five years is equivalent to 1,000 euros a ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:292048 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=11502.10531.5
