Cost of insuring against Bank of America default jumps

The cost of insuring against a default by Bank of America reached a new high yesterday as investors' fears over US exposure to the European debt crisis deepened.

Credit default swaps on Bank of America rose to 495 basis points, from a previous high of 456bp on 4 October and a low of 300bp in late October, according to the FT. This is equivalent to a cost of $495,000 a year to insure $10m of BofA debt over five years, according to data provider Markit. In early October, the cost of default protection on US banks had surged to levels not seen since 2008 and 2009 as investors worried Europe’s sovereign debt crisis could cause contagion in the US financial system. CDS protection on European financials also rose to fresh highs on Wednesday, the ...