LONDON, March 14 (Reuters) - The cost of insuring Greek debt against default fell on Monday, leading a rally in most lower-rated euro zone sovereign CDS after European leaders struck an unexpected deal to strengthen the bloc’s bailout fund. Euro zone leaders agreed to increase the full lending capacity of the European Financial Stability Facility and allow it to buy bonds of distressed countries in primary markets and lower the interest rate on Greece’s bailout [ID:nL3E7EB0D7]
Five-year credit default swaps (CDS) on Greek government debt fell by over 100 basis points to 940 bps, according to data monitor Markit. This means it costs 940,000 euros to protect 10 million euros of exposure to Greek bonds.
Irish CDS was the exception among the peripheral euro zone countries, rising 2 bps to 602 bps after the terms of its bailout deal were not improved at the summit.
Reporting by William James