Bloomberg News

Credit-Default Swaps in U.S. Reach Lowest in More Than Two Weeks

February 27, 2012

Feb. 27 (Bloomberg) -- A benchmark gauge of U.S. company credit risk reached a more than two-week low as a report showed the housing market is benefiting from an increase in hiring, falling home prices and record-low borrowing costs.

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, decreased 0.5 basis point to a mid-price of 95.4 basis points at 4:59 p.m. in New York, according to Markit Group Ltd.

The gauge erased an earlier increase after the National Association of Realtors reported today that its index of pending home resales climbed 2 percent in January after a 1.9 percent decrease in the prior month that was smaller than previously estimated. The median forecast of 44 economists in a Bloomberg News survey called for a 1 percent advance.

The swaps gauge, which typically falls as investor confidence improves and rises as it deteriorates, touched 95.2 basis points earlier, the lowest level since Feb. 9 on an intraday basis.

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.

The index increased earlier today after Group of 20 finance ministers and central bank governors who met over the weekend in Mexico City rebuffed German-led calls for financial support to contain Europe’s sovereign-debt crisis.

--With assistance from Mary Childs in New York. Editor: Shannon D. Harrington

To contact the reporter on this story: Dennis Fitzgerald in New York at dfitzgerald5@bloomberg.net

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


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