US and European CDS spreads tighten

The cost of credit protection on eurozone financial institutions dropped this morning, with markets continuing to stabilise after recent government interventions.

In the UK, five year credit default swaps (CDSs) on Lloyds TSB – set to form Lloyds Banking Group by January 2009 with the planned acquisition of HBOS – narrowed to 63 basis points at 1000 GMT this morning from 64.8bp at the close of trading yesterday.

CDS spreads on HBOS tightened 1.7bp to 96bp, according to credit information specialist CMA DataVision. As part of the deal, both banks plan to raise a combined £13 billion from investors, with an additional £4 billion of preference shares to be

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