U.S. Company Credit Swaps Rise as Central Banks’ Actions Weighed

A gauge of U.S. corporate credit risk increased for a second day as investors weighed the abilities of central banks worldwide to bolster economic growth.

The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, rose 0.8 basis point to a mid-price of 69.8 basis points at 9:37 a.m. in New York, according to prices compiled by Bloomberg. That’s the biggest increase in more than a week.

The European Central Bank will refrain from cutting its interest rate again until at least 2015, according to the median of 18 forecasts in a monthly Bloomberg survey of economists, while the Bank of England left its stimulus program unchanged today. In the U.S., applications for unemployment payments decreased by 4,000 to 323,000 in the week ended May 4, the fewest since January 2008, Labor Department figures showed today.

It is “disturbing” that “more and more is being expected of central banks,” Federal Reserve Bank of Philadelphia President Charles Plosser said in an interview with Tom Keene and Sara Eisen on Bloomberg television’s “Surveillance” today. “We are expected to solve all the world’s problems. Our fiscal authorities are not doing a very good job in any country.”

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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