Credit-Default Swaps in U.S. Fall for First Time in Three Days

A benchmark gauge of U.S. company credit risk fell for the first time in three days.

The Markit CDX North American Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 1.7 basis points to a mid-price of 93.5 basis points at 8:46 a.m. in New York, according to prices compiled by Bloomberg.

The index, which typically falls as investor confidence improves and rises as it deteriorates, dropped even as a Federal Reserve report showed New York-area manufacturing shrank more than forecast in December.

The Federal Reserve Bank of New York’s general economic index dropped to minus 8.1, the fifth month of contraction, from minus 5.2 in November. The median forecast of 55 economists in a Bloomberg survey called for minus 1. Readings of less than zero signal contraction.

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: John Parry at jparry5@bloomberg.net

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