Bloomberg News

U.S. Company Credit Swaps Decline as Juncker Eases Debt Concerns

June 20, 2011

June 20 (Bloomberg) -- A benchmark credit-default swaps index in the U.S. eased for a second day amid European assurances that a Greek default can be avoided.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 0.3 basis point to a mid-price of 99.3 basis points as of 4:48 p.m. in New York, according to index administrator Markit Group Ltd.

The credit swaps index, which typically rises as investor confidence deteriorates and falls as it improves, climbed to 100.5 on June 16, the highest level since Oct. 4, as economists lowered growth forecasts for the U.S. and Greek Prime Minister George Papandreou faced domestic opposition to budget cuts, roiling debt markets globally.

The index reversed an earlier increase today of 1 basis point after Luxembourg’s Jean-Claude Juncker said Papandreou assured him the government would do everything to ensure financial aid from the European Union and International Monetary Fund before the Greek parliament resumes debating a motion of confidence in the government. Juncker leads the group of euro- area finance ministers.

Over the weekend, Europe’s leaders left open whether the country will get the full 12 billion euros ($17.1 billion) promised for July as part of last year’s 110 billion-euro lifeline.

Markit’s CDX North America High Yield Index, which falls as investor confidence deteriorates and rises as it improves, was unchanged at 99.7 percent of face value, according to Markit.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

--Editors: Pierre Paulden, Alan Goldstein

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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