A benchmark gauge of U.S. credit risk rose from almost the lowest level in more than seven months amid concern weakness in the euro-area economy will damp the global recovery.
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 1.1 basis points to a mid-price of 93.9 basis points at 3:51 p.m. in New York, according to Markit Group Ltd.
The gauge advanced as a report showed Germany’s retail sales unexpectedly decreased in January. Spain raised its budget deficit target for 2012, breaching its commitment with its European partners, as a deepening economic slump hampered efforts to rein in the euro area’s fourth-biggest shortfall.
The swaps index, which typically rises as investor confidence deteriorates and falls as it improves, touched 92.2 basis points yesterday, the lowest level on an intraday basis since July 22. 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 U.S. two-year interest-rate swap spread, a measure of stress in credit markets, fell 1.12 basis points to 25 basis points. The spread narrows when investors favor assets such as corporate bonds and rises when they seek the perceived safety of government securities.
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