Insurance: May 8, 2012

CDS iTraxx indexes like pushing wider political risks weigh
- Greece in the spotlight as an electoral stalemate fuels speculation the output of the euro
- Pressure on Merkel tries to Holland as an alternative to austerity
(Override throughout; adds details, comments, update level.) London (Dow Jones) - The cost of debt insurance against default rose Tuesday European investors will consider how two days of political turmoil will affect the euro area.
In an effort to Greece, across the political spectrum are government failed on Monday. Election day before they were inconclusive and increased the likelihood that a fresh poll in June. Without the new management of the country it can not fulfill the conditions bailout package from the European Union and the International Monetary Fund, putting further funding. Prompted speculation that the country will have to abandon the euro, and Citigroup economists said on Monday the currency likely output is as high as 75%.
"The price of too much austerity measures proved in the elections in Greece," as the two major parties lost their majority in Parliament at the expense of more radical parties, "said Tobias Blattner, an analyst at Daiwa Capital Markets.
In France, opposition to austerity measures brought the victory of François Hollande, the Socialist candidate in the presidential election on Sunday. He promised that it will negotiate the German-controlled fiscal agreement aimed at stricter fiscal discipline among the 17 euro area countries to insert a clause on growth. That sounds jittery market sentiment.
"German Chancellor Angela Merkel reiterated the need for austerity and showed little willingness to compromise on the agreed fiscal compact," said Elisabeth Afseth and Brian Barry, fixed income analysts at Investec. "If political agreement across Europe is dying, she may have little choice but to mitigate its attitude."
Around 0920 GMT, SovX Western Europe index, which investors use to buy or sell credit default swaps on a basket of 15 sovereign borrowers was two basis points wider at 274/278 basis points, according to data provider Markit. CDS are derivatives that act as insurance contracts on debt. If the borrower defaulting buyers compensate sellers.
ITraxx Europe Index, which includes 125 high-grade borrowers, 25 of them are banks and insurance companies was four basis points wider at 147/148 basis points. Crossover index of 40 mostly sub-investment-grade European corporate borrowers by 14 basis points wider at 668/671 basis points.
At its planned auction, Greece EUR1.3 billion sold in 26-week treasury bills, slightly above its target amount. The financial stability is also trying to sell short-term debt, with the results of EUR2 billion three-month bill auction is expected shortly after 1000 GMT.
-By Ben Edwards, Dow Jones Newswires, 44-20-7842-9287, ben.edwards @ dowjones.com (Costas Paris and Stelios Bouras in Athens contributed to this article.)

Tuesday, May 8, 2012

UPDATE: Europe Debt Insurance Costs Rise On Political Turmoil

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