U.S. Company Credit Swaps Rise as Chinese Economic Growth Slows

A gauge of U.S. corporate credit risk increased after China’s economy lost momentum in the first quarter.

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, added 0.6 basis point to a mid-price of 82.6 basis points at 8:12 a.m. in New York, according to prices compiled by Bloomberg.

China’s gross domestic product rose 7.7 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compared with the 8 percent median forecast in a Bloomberg survey of economists and 7.9 percent growth in the fourth quarter. Concern that the global recovery is waning may stoke investor worries that companies will have difficulty repaying obligations.

The credit-swaps index typically rises as investor confidence 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 contract protecting $10 million of debt.

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

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

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