European corporate junk CDS index hits highest since March 2020

BY Reuters | CORPORATE | 09/26/22 05:33 AM EDT

LONDON, Sept 26 (Reuters) - The cost of insuring exposure to European corporate bonds hit its highest level since March 2020, when the COVID-19 pandemic rattled world markets, S&P Global Market Intelligence data showed on Monday.

The spread on the iTraxx European Crossover index, which measures the cost of insuring exposure to a basket of sub-investment-grade European companies surged 14 basis points (bps) from Friday's close to 651 bps, as markets came under fresh pressure amid fears over rising interest rates and a sharp selloff in British assets following last week's fiscal statement.

The index has risen more than 400 bps since the start of the year, data showed. (Reporting by Dhara Ranasinghe, editing by Karin Strohecker)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.