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Corporate Debt Protection Costs Climb Amid Depression Concern

excerpt

The cost of protecting corporate debt from default jumped to a record in Europe and neared a high in the U.S. amid concern that the global recession will sink into a depression.

Credit-default swaps on a benchmark index tied to below- investment grade companies in Europe reached levels considered distressed for the first time. The cost to protect U.S. leveraged loans from default neared a record, and a benchmark gauge of credit risk tied to investment-grade companies including retailer J.C. Penney Co. and Alcoa Inc., the largest U.S. aluminum producer, also jumped as a private report showed the nation’s companies last month cut the most jobs in seven years.

“Markets are pricing somewhere between a recession and a depression, and that is what we are faced with,” said Philip Gisdakis, a Munich-based credit strategist at UniCredit SpA, Italy’s biggest bank. “We are already in a recession. The next economic phase will not be recession, but depression.”

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Technorati Tags: Alcoa, Alcoa Inc, Aluminum Producer, Benchmark Index, Companies In Europe, Corporate Debt, Credit Default Swaps, Credit Risk, Debt Protection, Depression, Earthquakes, Excerpt, Gauge, Global Recession, J C Penney, J C Penney Co, Leveraged Loans, Seven Years, Strategist, Unicredit