Bloomberg News

Default Swaps in U.S. Little Changed on China’s Europe Pledge

February 15, 2012

Feb. 15 (Bloomberg) -- A benchmark gauge of U.S. company credit risk was little changed as China pledged to invest in European bailout funds and sustain its holdings of euro assets, easing the region’s sovereign-debt turmoil.

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, fell by 0.4 basis point to a mid-price of 98.1 basis points at at 7:55 a.m. in New York, according to Markit Group Ltd.

The gauge slipped toward a six-month low as People’s Bank of China Governor Zhou Xiaochun said in Beijing that his nation would participate in the resolution of Europe’s sovereign-debt crisis. Germany’s economy contracted in the fourth quarter less than economists forecast, a report showed.

The swaps index, which typically falls as investor confidence improves and rises as it deteriorates, touched 94.1 basis points on Feb. 9, 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


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