Bloomberg cited Mr Jonathan Pitkanen a credit analyst at Aviva Investors in London as saying that the cost of protecting against a default by the world's largest commodity trader Glencore International AG has risen 5 fold in 2 months as investors run scared from mining companies.

According to data compiled by Bloomberg, Glencore is the largest shareholder in Swiss copper and nickel producer Xstrata Plc, which has plunged 74% on the London Stock Exchange in the same period. Credit default swaps for Baar, Switzerland based Glencore's 5 year bonds climbed to 1,240 basis points.

The chart of the day shows how Glencore's credit default swaps jumped while shares of Xstrata fell.

Mr Pitkanen said in an interview that “It is all fear at the moment. People are scared and they are running scared from this sector. The market's reaction has been completely overcooked.”

Standard & Poor's on October 14th cut its outlook for Glencore to stable from positive and affirmed its BBB rating. He said that “The movement in the spread doesn't seem to bear any resemblance to their credit fundamentals at the moment.”

A basis point on a credit default swap contract protecting USD 10 million of debt from default for 5 years is equivalent to USD 1,000 a year. The contracts rise as investor confidence deteriorates and fall as it improves.