March 12, 2020 / 5:51 PM / in a month

European junk debt insurance costs spike after ECB disappoints

LONDON, March 12 (Reuters) - The cost of insuring against European junk debt defaults spiked after the European Central Bank’s stimulus package to combat coronavirus widely disappointed debt markets.

The iTraxx European crossover index of credit default swaps, which measures the cost of insuring exposure to a basket of sub-investment-grade European companies, jumped 114 basis points to 593 basis points on Thursday, according to Markit, its highest since 2012.

The ECB said it would offer fresh loans to banks, provide previously agreed liquidity facilities at even more favourable rates and it would temporarily increase asset purchases to help the economy cope. But it disappointed markets by keeping interest rates unchanged.

The spread on the index has doubled in just over one week as junk bonds have come under severe pressure due to coronavirus.

Reporting by Yoruk Bahceli; editing by Abhinav Ramnarayan

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