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There is an index called the Markit iTraxx Crossover Index that measures the cost of protection against junk-rated companies in Europe defaulting on debt-using credit default swaps. It is watched very closely because it indicates sentiment in the credit markets.
The iTraxx Index hit its highest level in its five-year history, implying that a record number of sub-investment grade companies in Europe are getting closer to being unable to meet debt obligations.
Stress was also evident in the short-term money markets, with the spread between sterling overnight market rates and London interbank rates rising to 164 basis points from 127 basis points in January.
But it was in the UK where real concern is growing more than in the US or Europe. There are real worries over the solvency of banks in the UK, which has increased in recent weeks.
There is another iTraxx Europe index that measures mainly investment grade companies in Europe. This index widened by 4.2 basis points to 193 basis points.
Since this is a global crisis, it is important to follow what is going on around the world. Do you follow world markets?
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