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November 15, 2010 at 11:41 AM
Europe’s sovereign debt crisis has turned the region’s credit markets upside down, with companies now the safest ever relative to governments.
“In the old order, sovereigns were tighter than corporates,” Greg Venizelos, a credit strategist in London at BNP Paribas SA, told Bloomberg. “There’s been a repricing and corporates are now better credit quality than sovereigns in the periphery.”
According to the news service, 33 companies in an index of credit-default swap prices are less risky than governments, including six each in Spain and Italy. The index of 125 European companies dropped last week to a record 76 basis points lower than an index of sovereigns from Greece to Germany.
Credit-default swaps, which investors use to insure against losses or speculate on creditworthiness, show how non-financial companies have shrugged off the worst effects of the budget-deficit crisis that has roiled nations. Bloomberg says companies with diversified or stable revenue and strong balance sheets have become the new havens amid concern that Europe’s so-called peripheral countries will need bailouts.
