West European Debt Riskier Than Region's East for First Time: Euro Credit

Western European government bonds are riskier than emerging-market debt for the first time as investors brace for $1.1 trillion of borrowing from euro-region nations this year.

The Markit iTraxx SovX Western Europe Index of credit- default swaps insuring the debt of 15 countries, including Germany, Greece and Portugal, climbed to 7 basis points more than the Markit iTraxx SovX CEEMEA Index linked to Romania, Turkey and Ukraine, according to data provider CMA. The developed nations were 160 basis points more creditworthy than their emerging-market peers as recently as February.

Portugal’s borrowing costs surged at a six-month bill sale this week, the first of Europe’s high-deficit nations to test investor demand in 2011 after the threat of default forced Greece and Ireland to seek bailouts last year. Spain and Italy together need to raise 317 billion euros ($413 billion) this year, according to BNP Paribas SA.

“Concerns about the periphery are dragging down western Europe,” said Harpreet Parhar, a strategist at Credit Agricole SA in London. “Emerging markets have solid growth stories and are not directly weighed down by peripheral issues.” (more)