Bloomberg News

Credit-Default Swaps in U.S. Approach Lowest in Almost a Week

February 21, 2012

Feb. 21 (Bloomberg) -- A benchmark gauge of U.S. company credit risk approached the lowest level in almost a week as Greece won a second bailout.

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, dropped by 0.5 basis point to a mid-price of 98.2 basis points at 7:47 a.m. in New York, according to Markit Group Ltd.

The gauge slipped as European governments wrung concessions from private investors and tapped into European Central Bank profits to shield the euro area from a precedent-setting default. U.S. economic reports this week are forecast to show home sales climbed in January to the highest level since May 2010.

The index, which typically falls as investor confidence improves and rises as it deteriorates, touched 97.6 basis points on Feb. 17 and 97.1 basis points two days earlier.

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.

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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