A measure of U.S. corporate credit risk held at the lowest level in two months as U.S. and Russian diplomats met to discuss Ukraine. A unit of Ford Motor Co. (F:US) sold $1.75 billion of bonds.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, declined 0.1 basis point to 62.4 basis points as of 5:12 p.m. in New York, according to prices compiled by Bloomberg. The measure was poised to close at the lowest level this year.
U.S. Secretary of State John Kerry met Russian foreign minister Sergei Lavrov in Paris, heading a global diplomatic push to ease tension. Stocks were little changed today following yesterday’s climb after Russian President Vladimir Putin said there was no immediate need to invade Ukraine, stirring optimism that the worst standoff between Russia and the West since the end of the Cold War was cooling.
“The belief that we will see de-escalation has brought the risk trade back in force,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. “There’s huge demand for risky assets out there and so long as the Federal Reserve remains generally accommodative, we expect these risky assets to perform relatively well.”
Federal Reserve Chair Janet Yellen and her policy-making colleagues are trying to determine whether recent economic weakness stems from harsh winter weather or fundamental obstacles to growth. The economy in most regions grew last month even as inclement weather impeded hiring, disrupted supply chains and kept customers away from stores, the Fed said today in its Beige Book business survey.
The swaps gauge 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.
Ford Motor Credit Co., the finance arm of the second-largest U.S. automaker, sold $1.1 billion of 2.375 percent, five-year notes that yield 93 basis points more than similar-maturity Treasuries and $650 million of five-year, floating-rate debt to yield 83 basis points more than the three-month London interbank offered rate, according to data compiled by Bloomberg.
The securities may be rated Baa3 by Moody’s Investors Service, Bloomberg data show. General Motors Co. is the largest U.S. carmaker.
Fixed-income exchange-traded funds in the U.S. reported $6.1 billion of withdrawals on March 4, compared with a 20-day average of $953.9 million inflows, Bloomberg data show. While government-debt and emerging-markets funds lost assets, corporate-debt ETFs attracted new money.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 2.1 basis points to 309.3, Bloomberg prices show. Speculative-grade bonds are rated below Baa3 by Moody’s 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 rose 1.5 basis points to 97.5, Bloomberg data show.
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