A measure of U.S. company credit risk fell after data showed payrolls in December rose at the slowest pace in almost three years. Community Health Systems Inc. (CYH:US) is planning a $4.58 billion bond sale.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, dropped 1.2 basis points to 63.9 basis points as of 4:31 p.m. in New York, according to prices compiled by Bloomberg. The measure declined for the first time in five days.
Investors are looking at employment data to gauge the strength of the economic recovery to determine how long the Federal Reserve will continue its stimulus measures, which have boosted the credit markets. The 74,000 gain in jobs, Labor Department figures showed today, lags behind an estimate of 197,000, which was the median forecast of 90 economists surveyed by Bloomberg. The Fed announced in December it would scale back on its monthly bond-buying program to $75 billion, a decrease of $10 billion.
The credit derivatives market isn’t “necessarily highly correlated to a given immediate event, like a jobs report,” Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York, said in a telephone interview. “It’s a little bit tighter because there’s no real risk that people are looking at it as being dramatically poor job numbers.”
The swaps index typically falls as investor confidence improves and rises as it deteriorates.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 5 basis points to 310, Bloomberg prices show. High-yield, high-risk bonds are rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.
The extra yield investors demand to hold investment-grade corporate bonds rather than government debt widened 1 basis point to 109.7, Bloomberg data show.
Community Health is planning to issue $1.705 billion of secured notes due 2021 and $2.875 billion of unsecured debt maturing 2022, the Franklin, Tennessee-based company said today in a statement. The junk-rated offering will add to $32.5 billion of corporate debt sold in the U.S. this year through yesterday, according to data compiled by Bloomberg.
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