A gauge of U.S. corporate credit risk held as a government report showed producer prices were little changed in July. JPMorgan Chase & Co. (JPM) sold $750 million of 30-year bonds.
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, rose 0.2 basis point to a mid-price of 75.5 basis points as of 4:19 p.m. in New York, according to prices compiled by Bloomberg.
Investors are looking at economic data including inflation and employment reports to assess when the Federal Reserve will begin tapering its $85 billion in monthly asset purchases that have strengthened credit markets. The producer price index was unchanged last month after a 0.8 percent gain in June, a Labor Department report showed today in Washington.
“Inflation is at least one metric that is not changing,” Rajeev Sharma, who manages $1.5 billion of fixed-income assets in New York at First Investors Management Co., said in a telephone interview. “If we do see inflation creep up, it bodes more to tapering happening sooner rather than later. I don’t think the market will be excited if they see that number rise.”
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.
Fed policy makers have set a goal of 2 percent for inflation. Chairman Ben S. Bernanke next month will probably reduce the central bank’s monthly bond purchases, according to 65 percent of economists surveyed Aug. 9-13 by Bloomberg.
JPMorgan sold 5.625 percent, subordinated notes to yield 190 basis more than similar-maturity Treasuries, according to data compiled by Bloomberg. Proceeds will be used for general corporate purposes, the data show.
T-Mobile US Inc. (TMUS), the fourth-largest U.S. wireless carrier, sold $500 million of five-year notes in its first debt offering after merging with MetroPCS Communications Inc., Bloomberg data show. The 5.25 percent securities were priced to yield 378 basis points more than benchmarks.
The default premium on the Markit CDX North American High Yield Index, a measure of speculative-grade corporate bond risk, fell 0.9 basis points to 380.1 basis points, Bloomberg prices show.
The average extra yield investors demand to hold investment-grade corporate bonds rather than similar-maturity Treasuries widened 1.4 basis points to 129.3 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt rose 3.5 basis points to 564.7 basis points.
High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and less than BBB- at Standard & Poor’s.
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