By Mark Brown
LONDON–The cost of insuring Irish sovereign debt against default using credit derivatives rose Thursday morning, while the cost for other peripheral euro-zone members was largely unchanged.
Irish voters go to the polls in the Donegal South West by-election Thursday, which could put further pressure on the country’s coalition government.
Ireland’s five-year sovereign CDS were 0.19 percentage point higher at six percentage points, according to Markit data, while Portugal’s were 0.02 percentage point lower at 4.8 percentage points and Spain’s just 0.01 percentage point higher at three percentage points.
Belgian and Italian CDS were both unchanged at 1.49 percentage points and 2.02 percentage points, respectively, while Greek CDS were 0.07 percentage point tighter at 9.65 percentage points.
CDS are derivatives that function like a default-insurance contract for debt. If a borrower defaults, sellers compensate buyers, who may be protecting investments, or making bearish bets against companies or countries.
A 0.01 percentage-point rise or fall in the cost of five-year CDS equates to a $1,000 rise or fall in the annual cost of protecting $10 million of debt for five years.
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