U.S. Corporate Credit Swaps Decline Before Service-Industry Data

A gauge of U.S. corporate credit risk fell before data that may show the service industry in the U.S. grew in January and a day after the measure rose the most in five weeks.

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, dropped 1.2 basis points to a mid-price of 89 basis points at 8:08 a.m. in New York, according to prices compiled by Bloomberg. The gauge increased 4.1 basis points yesterday, the most since Dec. 28.

An expanding services segment, which is the biggest part of the economy, may ease investor concern that companies’ ability to repay debt will be hampered. The Institute for Supply Management’s non-manufacturing index is estimated to follow December’s 55.7 reading, the highest level in 10 months, according to the median forecast of 76 economists in a Bloomberg survey. The data will be released at 10 a.m. in New York.

The credit-swaps index typically falls as investor confidence improves and rises as it deteriorates. 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: 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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