NEW YORK (Reuters) - The cost of protecting American International Group’s debt with credit default swaps plunged on Wednesday after U.S. authorities announced an emergency $85 billion rescue of the insurer.
AIG‘S five-year credit default swaps fell to 21.5 percent upfront early on Wednesday from 43 percent upfront at Tuesday’s close, plus 500 basis points annually, according to data from Markit Intraday. That means it costs $2.15 million in upfront payments plus $500,000 in annual premiums to insure $10 million of AIG debt.
AIG’s rescue calls for the Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.
Reporting by Dena Aubin, Editing by Chizu Nomiyama