EU CDS and european financial system

The European CDS index hits its highest level since March 2020… The cost of insuring exposure on European corporate bonds has reached its highest level since March 2020, when the Covid-19 pandemic rattled world markets, data from S&P Global Market Intelligence shows.

The difference in the iTraxx European Crossover index, which measures the cost of exposure to a basket of sub-investment-class European companies, came close to 651 basis points, up 14 basis points (bps) from Friday, September 23, as the markets came under new pressure. Fears of rising interest rates and sharp sales in British assets after last week’s financial statement are among those risks.

The data showed that the index has increased by more than 400 basis points since the beginning of the year.

Triple Digit Cost… European high-grade default swap index rises above 100 basis points… Source: Bloomberg, CBBT

We can see a clear uptrend since the beginning of 2022. As we saw above, the index ended on September 23 with 651 basis points, which is 4.65 higher than the March 2020 pandemic picture. We can speculate that the curve has risen sharply recently due to the war in Ukraine, which has led to higher commodity prices, slowing economic growth and uncertainty in the markets.

Kaynak: Tera Yatırım- Enver Erkan
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