The cost of insuring Spanish sovereign bonds against default rose today on speculation that the indebted nation may seek aid from the European Union and the International Monetary Fund.

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Credit-default swaps for Spanish debt climbed 20 basis points to 425 this morning, while a general index of swaps on 15 governments rose five basis points to 365, signaling declining confidence in the bonds.

News that Spanish Prime Minister Mariano Rajoy’s government may be considering applying for loans from the EU’s rescue fund and the IMF has generated increased concern over the state of country’s finances. Spain’s unemployment rate rose to 23 percent in December, and the new government this week increased its deficit forecast to 8 percent of gross domestic product from 6 percent.

Italian credit-default swaps jumped 15 basis points to 505, while Hungary’s CDS rate climbed 37 basis points to a record 687. The cost of insuring against default on financial debt also rose today in Europe, according to JPMorgan Chase & Co., while swaps on corporate debt were little changed.

The Markit iTraxx Financial Index, which tracks the senior debt of 25 banks and insurers, increased six basis points to 270.5. Contracts on the Market iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings fell two basis points to 736.5. The Markit iTraxx Europe Index, which tracks 125 companies with investment-grade ratings, rose 0.5 basis points to 169.75.

A single basis point on a credit-default swap insuring 10 million euros of debt for five years is the equivalent of 1,000 euros a year. In case of default, swaps pay the buyer the debt’s face value in exchange for the underlying securities or cash equivalent.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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