(Recasts lead, updates CDS, bond levels)
NEW YORK, March 4 The cost of protecting
General Electric Capital Corp's debt against default eased on
Wednesday after hitting a record high earlier in the session,
according to data from Phoenix Partners Group.
Five-year credit default swaps on GE Capital traded around
15 percent upfront, plus 500 basis points annually, down from a
record 20 percent upfront plus 500 basis points a year earlier
on Wednesday. That means it now costs about $1.5 million in an
upfront payment, plus $500,000 a year to insure $10 million of
debt. The swaps had closed on Tuesday at 14 percent upfront
plus 500 basis points annually.
Part of the recent widening in GECC's credit default swaps
may stem from hedging by dealers in collateralized debt
obligations, Tim Backshall, chief strategist at Credit
Derivatives Research, said in a note on Monday.
GECC was included in many CDOs because of its high ratings
and significant spreads, he said.
GECC's bonds also came under pressure in volatile trading
on Wednesday. Yield spreads on its 4.8 percent notes due in
2013 widened by 187 basis points to 793 basis points over
Treasuries, according to MarketAxess. (Reporting by Dena
Aubin, Editing by Walker Simon)
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