RTRS: U.S. Company Risk Benchmark Pares Biggest Weekly Decline Since June 2009
A benchmark gauge of U.S. corporate credit risk pared its biggest weekly decline in more than two years on concern that efforts to curb the sovereign debt crisis won’t be enough to safeguard Italy, the region’s third largest economy.
The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness added 2.1 basis points to 115.5 at 8:44 a.m. in New York, according to index administrator Markit Group Ltd.
Traders pushed the index to its biggest daily decline since May 2010 yesterday on optimism that creditworthiness would improve globally after European leaders agreed to a rescue package for debt-laden nations. For the week, the measure is down 15.8 basis points, poised for the biggest decrease since June 2009.
The Rome-based Treasury sold 3.08 billion euros ($4.36 billion) of 2014 bonds to yield 4.93 percent, the highest since November 2000, and up from 4.68 percent on Sept. 29. Italy’s bonds extended declines after the sale.
The U.S. credit index, which typically falls as investor confidence improves and rises as it deteriorates, has decreased from a more than two year high of 150.1 basis points on Oct. 3.
Credit swaps 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: John Parry in New York at jparry5@bloomberg.net
To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net
