By Abigail Moses Oct. 15 (Bloomberg) -- The cost of protecting corporate bonds from default rose, snapping a two-day decline, on investor concern a $2 trillion bank rescue plan will not stop a global recession. Credit-default swaps on the CDX North America Investment- Grade index of 125 companies in the U.S. and Canada increased 7 basis points to 184, according to Phoenix Partners Group prices at 7:45 a.m. in New York. In London, the Markit iTraxx Europe index rose 6 basis points to 130, JPMorgan Chase & Co. prices show. The U.S. is already in a recession, Federal Reserve Bank of San Francisco President Janet Yellen said yesterday, even as central banks stepped up efforts to ease strains in financial markets. The European Central Bank, Bank of England and Swiss National Bank today loaned financial institutions a total $254 billion in their first tenders of unlimited dollar funds. ``Everyone believes the global financial system has been saved,'' said Suki Mann, a credit strategist at Societe Generale SA in London. ``The concern is they will not be able to apply the same type of medicine to save the economy. There is very little they can do to stave off recession.'' Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase indicates a deterioration in the perception of credit quality; a decline signals the opposite. Bank Debt The cost of protecting bank debt from default rose for the first day in more than a week with the Markit iTraxx Financial index of 25 European banks and insurers rising 5 basis points to 97, JPMorgan prices show. Zurich-based Credit Suisse Group AG rose 12 basis points to 88, according to CMA Datavision. Barclays Plc in London increased 13 to 84 and Royal Bank of Scotland Group Plc rose 8 to 89. Credit-default swaps on Merrill Lynch & Co. climbed 10 basis points to 180, Morgan Stanley rose 10 to 440 and Goldman Sachs Group Inc. was unchanged at 200, Phoenix prices show. A basis point on a credit-default swap contract protecting 10 million euros ($13.7 million) of debt from default for five years is equivalent to 1,000 euros a year. ``What we've seen is a necessary step in the right direction but we are not out of the woods,'' said Mark Bayley, a director of credit at ABN Amro Holding NV in Sydney. ``We still have fund managers and hedge funds fearful of redemptions, so it's difficult to get bullish.'' In Tokyo, Japan's benchmark credit-risk index rose 6 basis points to 184, Morgan Stanley prices show. The Asia index of 50 investment-grade borrowers outside Japan climbed 25 basis points to 270, while the region's high-yield benchmark was up 50 basis points at 830, according to Barclays Capital. To contact the reporters on this story: Patricia Kuo in Hong Kong at pkuo2@bloomberg.net; Abigail Moses in London Amoses5@bloomberg.net

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