Bloomberg News

Credit-Default Swaps in U.S. Fall as Payrolls Exceed Estimates

March 09, 2012

A benchmark gauge of U.S. company credit risk dropped for a third day as job gains topped estimates, reinforcing confidence in the pace of economic growth.

The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 0.3 basis point to 95.75 basis points at 4:59 p.m. in New York, according to Markit Group Ltd.

Employers boosted jobs more than forecast in February, with the 227,000 increase in payrolls exceeding the median projection of economists in a Bloomberg News survey which called for a 210,000 rise. Greece pushed through the biggest sovereign restructuring in history, easing concern that Europe’s fiscal crisis may spread, while industry group the International Swaps & Derivatives Association ruled the event will trigger payouts on about $3 billion in default insurance.

The index, which typically falls as investor confidence improves and rises as it deteriorates, has declined since touching 98.3 basis points on March 6, the highest level since Feb. 22, according to Markit.

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 reporter on this story: John Parry in New York at jparry5@bloomberg.net

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


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