Bloomberg News

Company Credit-Default Swaps in U.S. Hold at About One-Week Low

April 03, 2012

A benchmark gauge of U.S. company credit risk held at about the lowest level in a week.

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, was little changed at a mid-price of 90.5 basis points at 4:54 p.m. in New York, according to Markit Group Ltd. Earlier the index fell as much as 1.1 basis points.

Investors pushed the measure lower after factory orders rose 1.3 percent in February, Commerce Department figures showed. That trailed the median estimate of 1.5 percent according to 60 economists surveyed by Bloomberg News.

“Everyone is waiting for earnings to see new data points,” said Joel Levington, managing director of corporate credit at Brookfield Investment Management Inc. in New York. He expects “nominal earnings growth” in the first quarter, and said a consensus estimate of 7 percent earnings growth for the year “might be too aggressive.”

The swaps index, which typically falls as investor confidence improves and rises as it deteriorates, touched a more than one-year low of 84.7 basis points on March 19.

Credit-default swaps tied to Dublin, Ohio-based Wendy’s Co. (WEN:US) surged after a report that the second-largest U.S. hamburger chain will meet with lenders this week to discuss $1.325 billion in loans it’s seeking to refinance debt, according to a person with knowledge of the transaction.

Contracts on Wendy’s International Inc. climbed 100 basis points to 315.3, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. 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: Mary Childs in New York at mchilds5@bloomberg.net

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


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Companies Mentioned

  • WEN
    (Wendy's Co/The)
    • $8.17 USD
    • 0.02
    • 0.24%
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