Bloomberg News

U.S. Company Swaps Decline by Most in 3 Months Amid Greek Vote

June 21, 2011

June 21 (Bloomberg) -- The cost of protecting U.S. corporate bonds from default fell by the most in three months as the Greek government faces a confidence vote that may result in its avoiding a default.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 2.9 basis points to a mid-price of 96.6 basis points as of 5:21 p.m. in New York, according to index administrator Markit Group Ltd. That’s the largest drop since March 18.

Greek Prime Minister George Papandreou said Greece has the support of the European Union and faced tough talks with its European partners to emerge from its financial crisis. Saving Greece was the priority, he said, easing investor concern that the country may default and roil global credit markets. The credit swaps index, which typically falls as investor confidence improves, has declined from 100.5 on June 16, the highest level since October.

“If we give up in the middle of the road, history will judge us harshly,” Papandreou said as a three-day debate on a vote of confidence in his government drew to a close today. “The impression the political class in this country gives is that it hasn’t understood the seriousness of the crisis.”

Markit’s CDX North America High Yield Index, which rises as investor confidence improves and falls as it deteriorates, added 0.7 percentage point to 100.4 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.

--With assistance from Marcus Bensasson and Eleni Chrepa in Athens. Editors: Richard Bedard

To contact the reporter on this story: Mary Childs in New York at

To contact the editor responsible for this story: Alan Goldstein at

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