MBIA, Alcatel-Lucent Among Credits Added To CDX High-Yield Index
24 3월 2011 - 8:44AM
Dow Jones News
Troubled bond insurer MBIA Insurance Corp., communications
company Alcatel-Lucent USA Inc. and Parker Drilling Co. are among a
series of companies whose debt will be referenced by a key
derivatives index when it moves to a new series Monday, according
to data company Markit.
The updated CDX North America High-Yield Index, administered by
Markit, is a gauge of creditworthiness for each of its 100
constituents. The index rolls twice a year to a new series, and
this month's update will be its 16th version.
Credits that were in the 15th series of the CDX High-Yield but
haven't been put forward for the update include MBIA Inc., Tyson
Foods Inc., Flextronics International Ltd., Pride International
Inc., Massey Energy Co., Dole Food Co., AMR Corp., Constellation
Brands Inc. and Beazer Homes USA Inc., Markit said.
The final list is based on the frequency with which each credit
has been traded in the last six months, as determined by swaps data
held in the Depository Trust & Clearing Corp. It is also
designed to match sector and ratings weights in Markit's iBoxx USD
High Yield Liquid Index for high-yield bonds.
Replacing the nine companies removed are: MBIA Insurance, PMI
Group Inc., Kinder Morgan Kansas Inc., Pioneer Natural Resources
Co., MGIC Investment Corp., Universal Health Services Inc., Parker
Drilling, Alcatel-Lucent USA and Olin Corp.
Every time a credit derivatives index rolls to a new series, the
companies that are included are those that are perceived as most
relevant to the market--sometimes because they are the subject of
takeovers or mergers, and sometimes because they are seen as either
deteriorating or outperforming.
Credit derivatives are tradable, over-the-counter
contracts--most commonly sold in the form of credit default
swaps--that function like insurance for corporate debt. If a
borrower defaults, the seller pays the buyer compensation; and in
the case of an index trade, the swap buyer receives compensation on
a pro rata basis, reflecting the weighting of the defaulting
company in the index.
The names leaving Series 15 of the CDX High-Yield trade with an
average five-year CDS spread of 390 basis points, reflecting a cost
of $390,000 per year to insure $10 million of the debt for five
years. By comparison, the names entering Series 16 trade with an
average five-year CDS spread of 483 basis points, or $483,000 a
year.
-By Katy Burne, Dow Jones Newswires; 212-416-3084;
katy.burne@dowjones.com
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