European corporate credit derivatives jumped wider on Wednesday after German regulators announced a ban on short-selling ban, while analysts warned that it could lead to distortions. The regulator banned short-selling of European government bonds listed on German exchanges and of 10 German financial stocks as well as naked buying of credit default swaps on sovereigns.
By 1131 GMT, the investment-grade Markit iTraxx Europe index was at 120.25 basis points, according to data from Markit, 8.25 basis points wider versus late on Tuesday. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 574 bps, 42 bps wider. Another option for hedgers and speculators is to dump the euro.
Among single names, credits from peripheral countries Portugal and Greece led the slump. Five-year CDS widened by 29 basis points to 247.5 bps for Hellenic Telecom, by 28.5 bps to around 220 bps for Portugal Telecom and by 43 bps to 455 bps for Banco Espirito Santo.
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