Bloomberg News

Corporate Credit Swaps in U.S. Decline for Fourth Straight Day

October 04, 2012

A gauge of U.S. corporate credit risk fell for the fourth straight day as the European Central Bank announced that it will keep interest rates on hold.

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 0.8 basis point to a mid-price of 95.2 basis points at 7:59 a.m. in New York, according to prices compiled by Bloomberg.

The measure declined as ECB policy makers left the benchmark rate at a historic low of 0.75 percent. The U.S. will release weekly jobless claims figures today and September payrolls tomorrow after ADP Employer Services showed better- than-expected gains in employment yesterday. Signs of economic growth may reassure investors that companies’ balance sheets are improving, strengthening their ability to repay obligations.

The credit-swaps index typically falls as investor confidence improves and rises as it deteriorates. 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.

To contact the reporter on this story: Peter Rawlings in New York at prawlings@bloomberg.net

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


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