Bloomberg News

Corporate Default Swaps in U.S. Climb as Jobless Rate Increases

June 01, 2012

A gauge of corporate credit risk rose for the third consecutive day as American employers in May added the smallest number of workers in a year and the unemployment rate unexpectedly increased.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, climbed 3.2 basis points to a mid-price of 126.5 basis points at 5:28 p.m. in New York, according to prices compiled by Bloomberg. This week, the gauge has increased 9.1, the biggest advance since a 14.8 rise for the period ended May 18.

The measure surged after payrolls climbed by 69,000 last month, less than the most-pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in Washington. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.

The swaps gauge typically rises as investor confidence deteriorates and falls as it improves. 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: Richard Bravo in New York at

To contact the editor responsible for this story: Alan Goldstein at

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