Credit Swaps in U.S. Fall as Manufacturing Growth Beats Estimate

A benchmark gauge of U.S. corporate credit risk fell as manufacturing in the world’s biggest economy unexpectedly expanded in April at the fastest pace in 10 months.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, dropped 0.9 basis point to a mid-price of 93.9 basis points at 5:20 p.m. in New York, according to prices compiled by Bloomberg.

The swaps index fell after the Institute for Supply Management’s factory index climbed to 54.8 last month, exceeding the most optimistic forecast in a Bloomberg News survey, from 53.4 in March, the Tempe, Arizona-based group’s report showed today. Readings greater than 50 signal growth. Economists surveyed by Bloomberg News forecast a slower pace in April compared to the previous month.

China’s Purchasing Managers’ Index rose to 53.3 in April, the highest reading in a year, from 53.1 in March, the country’s statistics bureau and logistics federation said in a statement.

Credit-default swaps typically rise as investor confidence deteriorates and fall as it improves. 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.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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