Bloomberg News

U.S. Corporate Credit Swaps Fall as Retail Sales Increase in May

June 13, 2013

A gauge of U.S. corporate credit risk declined for the first time this week as retail sales and employment reports indicated a strengthening economy.

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, decreased 1.8 basis points to a mid-price of 85.7 basis points at 9:08 a.m. in New York, according to prices compiled by Bloomberg.

Investors are looking for signs of improvement in the world’s biggest economy to help determine when the Federal Reserve will begin to scale down its $85 billion monthly bond purchases. Retail sales rose 0.6 percent last month after increasing 0.1 percent in April, Commerce Department figures showed today in Washington. Applications for unemployment benefits dropped by 12,000 to 334,000 in the week ended June 8 from 346,000 the prior period, the Labor Department reported.

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 reporters on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net; Scott Harrison in New York at sharrison52@bloomberg.net

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


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