Bloomberg News

Corporate Credit Swaps in U.S. Hold at About Lowest in a Week

August 29, 2012

A gauge of corporate credit risk in the U.S. held at about the lowest in a week after a report showed the nation’s economy grew more than previously estimated in the second quarter.

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, decreased 0.3 basis point to a mid-price of 100.9 basis points at 5:35 p.m. in New York, according to prices compiled by Bloomberg. The index is up from 99.4 basis points on Aug. 22.

The swaps measure was little changed after revised Commerce Department figures showed gross domestic product climbed at a 1.7 percent annual rate from April through June, up from an initial estimate of 1.5 percent and matching the median estimate in a Bloomberg survey. Federal Reserve Chairman Ben S. Bernanke may cast light on monetary policy in a speech to central bankers on Aug. 31 in Wyoming.

“Data is sparse with many investors holding tight until Friday’s Jackson Hole speech,” Adrian Miller, director of global markets strategy at GMP Securities LLC in New York, wrote in a note to clients today.

The credit swaps index, which typically falls as investor confidence improves, reached a 15-week low of 98.5 basis points on Aug. 20. The contracts 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.

Low Volatility

A measure of price swings in the index is at the lowest level since May, according to data compiled by Bloomberg. Volatility over a 30-day period fell to 34, the least since reaching 33.2 on May 29, the data show. The measure is down from 40.5 on Aug. 7.

The U.S. two-year interest-rate swap spread, a measure of stress in credit markets, widened for the first time in eight days, increasing 0.16 basis point to 17.29 basis points. The measure, which rises when investors seek the perceived safety of government securities and falls when they favor assets such as corporate bonds, is down from 54.7 in November, the highest since May 2009.

Credit swaps tied to Darden Restaurants Inc. (DRI:US) climbed after the Orlando, Florida-based operator of the Red Lobster, Olive Garden and LongHorn Steakhouse chains entered (DRI:US) into a $300 million term loan agreement with Bank of America Corp. yesterday.

The swaps climbed 12.6 basis points to 170.7 basis points as of 4:30 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

To contact the reporter on this story: Mary Childs in New York at

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

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Companies Mentioned

  • DRI
    (Darden Restaurants Inc)
    • $57.37 USD
    • -0.35
    • -0.61%
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