Credit-Default Swaps in U.S. Little Changed on Greece Outlook
A benchmark gauge of U.S. company credit risk was little changed as European officials moved toward an agreement on a bailout for Greece, easing concern that the sovereign-debt crisis will slow the global economy.
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, dropped by 0.4 basis point to a mid-price of 98.6 basis points at 3:59 p.m. in New York, according to Markit Group Ltd.
The gauge held as Italian Prime Minister Mario Monti, German Chancellor Angela Merkel and Greek Prime Minister Lucas Papademos expressed optimism that an “agreement on Greece” can be reached at a Brussels meeting of euro-area finance ministers on Feb. 20. The three leaders said they were “confident that the euro group can reach an agreement on Greece on Monday,” Monti’s office said in an e-mailed statement today.
The swaps index, which typically falls as investor confidence improves and rises as it deteriorates, closed at 94.3 basis points on Feb. 3, the lowest level since July.
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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