Bank debt is the safest relative to corporate bonds in almost 16months amid confidence Europe's political leaders will step upefforts to end the region's crisis when they meet this week.

The Markit iTraxx Financial Index of credit-default swaps on thesenior debt of 25 European banks and insurers fell for a fifth dayand now exceeds a broader measure of 125 investment- gradecompanies by 49 basis points, compared with 120 basis points inJuly. The European Financial Stability Facility, the region'stemporary bailout fund, is selling 5.9 billion euros ($7.7 billion)of five-year bonds in its biggest deal since July.

Investors are growing more confident banks will ride out thecrisis that started in Greece nearly three years ago after theEuropean Central Bank unveiled a bond buying plan last month. GreekPrime Minister Antonis Samaras will pitch for an additional twoyears to meet budget-deficit targets at the meeting with hisEuropean Union counterparts as Spanish Prime Minister Mariano Rajoydelays asking for a bailout.

“Financials have outperformed on the basis of liquidityinjections and being ring fenced from peripheral risk by therhetoric if not the actions of the ECB,” said Simon Ballard, asenior credit strategist at National Australia Bank in London. “Themacro picture in terms of growth is still anemic.”

The financial index fell six basis points to 170 at 4 p.m. inLondon, while the Markit iTraxx Europe Index of 125 companies withinvestment-grade ratings dropped five basis points to 122. Thedifference between the gauges peaked at 150 basis points inNovember.

Investors should sell default protection on the corporate indexand buy the financial measure, according to Pierre-YvesBretonniere, a strategist at BNP Paribas SA in London.

Crossover Index

Contracts on the Markit iTraxx Crossover Index of 50 companieswith mostly high-yield credit ratings dropped 23 basis points to509. A decline signals improvement in perceptions of creditquality.

A basis point on a credit-default swap protecting 10 millioneuros of debt from default for five years is equivalent to 1,000euros a year. Swaps pay the buyer face value in exchange for theunderlying securities or the cash equivalent should a borrower failto adhere to its debt agreements.

The EFSF bonds will be priced at 23 basis points more than thebenchmark mid-swap rate, according to a person with knowledge ofthe deal. The notes were initially marketed with a spread of 25basis points.

Numericable Sells

Numericable Finance & Co. is also selling 410 million eurosof bonds, according to a person familiar with the offering, whoasked not to be identified because terms aren't set. Speculationthe Luxembourg-based cable operator is set to merge with VivendiSA's SFR mobile phone unit is credible, Bank of America Corp.analysts said yesterday.

Solihull, England-based Paragon Group of Companies Plc isoffering 175 million pounds ($282 million) of top rated bondsbacked by buy-to-let mortgages, according to a banker with directknowledge of the deal.

Sales of sub-prime mortgage backed debt are increasing, withInvestec Plc pricing 150 million pounds of the securities lastmonth.

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