Markit to launch CDS indexes on global sovereign debt

NEW YORK, June 29 (Reuters) - Data provider Markit said on Monday it will launch a group of four credit default swap indexes that track the perceived risks of sovereign debt as investors increasingly look to hedge the credit risks of industrialized countries.

"Historically, the trading of sovereign CDS was limited to emerging markets, reflecting the credit risk associated with the government debt of these countries," Markit said in a statement.

"However, an actively traded CDS market in industrialized sovereigns has now emerged as a result of the financial crisis and growing investor concerns relating to the solvency of developed economies," the data provider said.

Credit default swaps are used to protect against losses if a borrower defaults on their debt, or to speculate on their credit quality.

Markit also administers benchmark CDS indexes based on the debt of U.S. and European corporate issuers and emerging market countries.

The new indexes are expected to launch in July.

CDSs insuring the debt of industrialized economies are among the contracts with the largest volumes, with net volumes on Italy's debt standing at $20.08 billion, while Spain has $10.83 billion in net protection and Germany has $10.78 billion in net volumes, according to the Depository Trust & Clearing Corp.

The new indexes will include the Markit iTraxx SovX G7, which is based on the credit risk of most industrial countries, and the Markit iTraxx SovX Global Liquid IG, which will track the credit risk of countries in the Asia Pacific, Eastern Europe, Latin America, Middle East & Africa, North American and Western Europe, Markit said.

They will also include the Markit iTraxx SovX Western Europe, which will be based on the credit risk of 15 countries in Western Europe and the Markit iTraxx SovX CEEMEA, which will be based on the credit risk of 15 countries in Central Eastern Europe, Middle East and Africa.