Bloomberg News

U.S. Corporate Credit Risk Benchmark Rises as Confidence Sinks

October 25, 2011

Oct. 25 (Bloomberg) -- A benchmark gauge of U.S. corporate credit risk rose from the lowest level in more than a month as consumer confidence unexpectedly sank and home prices fell.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, added 3.4 basis points to 129.6 basis points at 5:05 p.m. in New York, according to index administrator Markit Group Ltd.

The measure, which typically rises as investor confidence deteriorates, and declines as it improves, climbed from the lowest level since Sept. 16 as data showed that the recovery of the U.S. economy is faltering. The New York-based Conference Board’s household sentiment index dropped to 39.8 in October, less than the most pessimistic forecast in a Bloomberg News survey.

“Economic recovery hopes took a punch in the stomach this morning,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, wrote in a note to clients and reporters.

Property values in 20 cities in August fell 3.8 percent from a year earlier, more than analysts had forecast, according to S&P/Case-Shiller. The credit swaps index has declined from 150.1 on Oct. 3, the highest level in more than two years, as investors wager that Europe’s leaders will prevent the region’s fiscal crisis from infecting bank balance sheets.

--Editors: Mitchell Martin, John Parry

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net

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


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