• Home >
• News >
• Futures News >

• Send
• Print
• Add To

UPDATE 1-AIG's credit default swaps fall to 19 pct upfront

Mon, Nov 10 2008, 15:23 GMT
http://www.afxnews.com

NEW YORK, Nov 10 (Reuters) - The cost of insuring American International Group's debt with credit default swaps tumbled sharply on Monday after the Federal Reserve increased its support for the insurer to about $150 billion.

"It sends a very strong signal to the markets and investors that this company is not going under," said Scott MacDonald, head of research at Aladdin Capital in Stamford, Connecticut. "It should help their balance sheet and anybody that does business with them."

Five-year credit default swaps on AIG fell to about 19 percent upfront from 49 percent upfront on Friday, plus 500 basis points in annual premiums, according to data from Markit Intraday. That means it costs $1.9 million a year in upfront costs to protect $10 million of AIG's debt for five years, plus $500,000 in annual premiums.

Under a new plan, the government is putting $150 billion at AIG's disposal, $27 billion more than it extended previously, after an initial bailout attempt failed to stabilize the company. For details click on.

(Reporting by Dena Aubin; Editing by Theodore d'Afflisio) Keywords: AIG CDS/MARKIT

(dena.aubin@thomsonreuters.com; +1-646-223-6325; Reuters Messaging: dena.aubin.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2008. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.