U.S. Company Credit Swaps Rise Before Consumer Confidence Data

A gauge of U.S. corporate credit risk rose as investors awaited a report on consumer confidence.

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 1.5 basis points to a mid-price of 77.8 basis points at 8:20 a.m. in New York, according to prices compiled by Bloomberg.

Investors are weighing the strength of the economic recovery with the Federal Reserve’s commitment to continue buying $85 billion of Treasury and mortgage debt a month to support growth. The Thomson Reuters/University of Michigan final index of U.S. consumer sentiment probably climbed in May to 83.7, the highest level since July 2007, according to the median projection of economists in a Bloomberg survey. The report is due at 9:55 a.m.

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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