Credit Swaps in U.S. Climb as Apple Posts No Growth in Profit

A gauge of U.S. corporate credit risk rose after Apple Inc., the world’s most valuable company, posted no profit growth and the slowest increase in sales in 14 quarters.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 0.2 basis point to a mid-price of 86.5 basis points, according to prices compiled by Bloomberg.

The credit-swaps index typically rises as investor deteriorates and falls 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 swap protecting $10 million of debt.

Profit at Apple was little changed at $13.1 billion, or $13.81 a share, in the period that ended Dec. 29, the Cupertino, California-based company said in a statement. Sales rose 18 percent to $54.5 billion. Analysts had predicted profit of $13.53 a share on revenue of $54.9 billion, the average of estimates compiled by Bloomberg. Shares fell as much as 6.6 percent in late trading.

The risk premium on the Markit CDX North American High Yield Index declined 0.9 basis point to 435.1 basis points, Bloomberg prices show. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s.

The average relative yield on junk-rated debt tightened 2 basis points to 473 basis points, or 4.73 percentage points, Bloomberg data show.

To contact the reporter on this story: Madhura Karnik in New York at mkarnik@bloomberg.net

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

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