Bloomberg News

Credit Swaps in U.S. Decline to Lowest Level in Almost Two Weeks

March 04, 2013

A gauge of U.S. corporate credit risk fell to its lowest level in almost two weeks amid renewed demands of austerity measures in the Euro area.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, fell 0.6 basis point to a mid-price of 85.8 basis points at 7:56 a.m. in New York, according to prices compiled by Bloomberg. That’s the lowest since Feb. 19 when the measure reached 85.4 basis points.

European leaders demanded that euro members press on with budget cuts to end the debt crisis as Italy edged closer to a new election after an anti-austerity vote last week resulted in political deadlock. Signs of global recovery may ease investor concern that companies’ ability to repay debt will be hampered. Finance ministers from the 17-member, single-currency bloc meet in Brussels today to discuss economic issues.

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: Madhura Karnik in New York at mkarnik@bloomberg.net

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


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