A gauge of U.S. corporate credit risk rose for a fourth day to a more than six-month high as Chinese equities entered a bear market on concern that a cash crunch will injure the 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, increased 5.7 basis points to a mid-price of 99.7 basis points at 8:28 a.m. in New York, according to prices compiled by Bloomberg. Earlier the index reached 99.8 basis points, the highest intraday level since Dec. 5.
Confidence in corporate credit has fallen since Federal Reserve Chairman Ben S. Bernanke said last week the central bank may begin dialing back its $85 billion in bond purchases if the economy improves as the Fed forecasts. China’s central bank refrained from using open-market operations to stem a cash crunch as the Hang Seng China Enterprises Index dropped 20 percent earlier this month from a recent peak.
The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. 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.
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