LONDON Aug 19 The cost of insuring exposure to
the debt of State Bank of India, used by investors as a proxy
for the Indian sovereign, jumped on Monday to 14-month highs as
the rupee plunged to new record lows.
Five-year credit default swaps on SBI traded at 351 basis
points, a 45 bps rise from Friday's close, data provider Markit
This is the highest level since June 2012 and indicates an
annual cost of $351,000 to insure $10 million worth of SBI debt
for a five-year period.
India is fighting to stem a rout in the rupee which
has hit record lows against the dollar on fears the country may
fail to finance its current account deficit.
India has no traded sovereign debt outstanding and investors
commonly use the state-owned SBI as a proxy to hedge exposure to
"The CDS move is understandable. When the currency is under
pressure it raises the question of how they will finance the
deficit, hence the reason CDS is widening," said Societe
Generale analyst Guillaume Salomon.