LONDON, June 26 (Reuters) - The cost of insuring Italian automaker Fiat's debt against default rose on Thursday after the group announced a new rescue plan that market participants said could benefit banks more than bondholders.
Traders quoted five-year credit default swaps on Fiat bid at 650 basis points, up around 100 basis points from Wednesday, meaning it now costs 650,000 euros a year to insure 10 million euros of the company's debt against default.
"The news is still coming out, and the market is not really stable. But we've seen quite a bit of widening," said one credit default swap trader.
Fiat's short dated bonds rose in value, however, climbing around two points in price to around 96 percent of face value at 0920 GMT, traders said. Fiat's longer dated bonds due in 2010 and 2011 were little changed at around 95 percent of face value.
"The short dated bonds have benefitted the most as the rights issue addresses the short term liquidity concerns," said one trader.
The trader added there had been a lot of interest in the company's dollar denominated bond due 2007 which has a put option allowing investors to sell the bond back to the company in July 2004.