A benchmark gauge of U.S. credit risk fell to a one-week low as data showed demand for houses may be starting to stabilize and as European policy makers lent three-year funds to banks, aiming to stem the debt crisis.
The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, decreased 2 basis points to a mid-price of 124.5 basis points at 4:39 p.m. in New York, according to Markit Group Ltd. It earlier today reached as low as 124.4, the lowest since Dec. 13, according to Markit Group Ltd.
The measure declined after data from the National Association of Realtors showed that sales of existing homes in the U.S. rose in November to a 10-month high. The Frankfurt- based ECB awarded 489 billion euros ($638 billion) in 1,134-day loans, more than economists’ median estimate of 293 billion euros in a Bloomberg News survey.
The U.S. data helped stoke demand for company debt, while amid “light” trading volume, credit derivatives outperformed cash bonds, according to Anthony Valeri, a market strategist at LPL Financial in San Diego, which manages $330 billion.
The index, which typically falls as investor confidence improves and rise as it deteriorates, has declined from 132.1 on Dec. 19, the highest this month, as investors wager that European leaders may prevent turmoil in bond markets from infecting bank balance sheets worldwide.
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.
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