Bloomberg News

Credit-Default Swaps in U.S. Increase for First Time in Six Days

January 24, 2012

Jan. 24 (Bloomberg) -- A benchmark gauge of U.S. company credit risk rose from a five-month low as talks over Greek debt restructuring faltered, stoking concern that Europe’s fiscal crisis may spread.

The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 0.4 basis point to a mid-price of 103.3 basis points at 5:23 p.m. in New York, according to Markit Group Ltd.

The gauge climbed for the first time in six days after Luxembourg Prime Minister Jean-Claude Juncker told reporters talks about relieving Greece’s debt burden were “off track.” His comments outweighed a Labor Department report that showed unemployment dropped in 37 U.S. states in December.

“Risk appetite suddenly turned south as Greek debt negotiations shifted to main stage and with both sides reluctant to budge,” Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York, said in an e-mail.

The index, which typically rises as investor confidence deteriorates and falls as it improves, touched 102.5 basis points yesterday, the lowest level since August.

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: John Parry, Dennis Fitzgerald

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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