Credit-Default Swaps in U.S. Rise for First Time in Five Days
February 06, 2012, 6:09 PM ESTBy Dennis Fitzgerald
Feb. 6 (Bloomberg) -- A benchmark gauge of U.S. company credit risk rose for the first time in five days as Greece struggled to reach a deal with its international creditors.
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 by 0.7 basis point to a mid-price of 95 basis points at 7:28 a.m. in New York, according to Markit Group Ltd.
The swaps gauge advanced from almost the lowest level in six months as Greece’s efforts to win a second bailout from the European Commission, the European Central Bank and the International Monetary Fund hung in a balance. Greece’s biggest public- and private-sector union groups called a 24-hour general strike for tomorrow to protest austerity measures.
The index, which typically rises as investor confidence deteriorates and falls as it improves, touched 94.3 basis points on Feb. 3, 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.
To contact the editor responsible for this story: Dennis Fitzgerald at dfitzgerald5@bloomberg.net
