Bloomberg News

U.S. Company Credit Risk Gauge Rises From Lowest in Two Weeks

August 30, 2011

Aug. 30 (Bloomberg) -- A benchmark gauge of U.S. corporate credit risk rose from the lowest level in almost two weeks before reports that may show U.S. house prices and consumer confidence weakened.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 2.4 basis points to a mid- price of 122.8 basis points as of 8:50 a.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, declined yesterday to 120.3 basis points, the lowest level since Aug. 18, after Federal Reserve Chairman Ben. S. Bernanke said the world’s biggest economy is gradually recovering.

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.

To contact the editor responsible for this story: John Parry at jparry5@bloomberg.net


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