Credit Swaps Fall in U.S.; Tenet to Sell $4.6 Billion of Bonds

A gauge of U.S. company credit risk reached the lowest intraday level in two weeks after signs of economic strength in China and Japan. Tenet (THC) Healthcare Corp. plans to sell $4.6 billion of notes in two parts.

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, fell 2.8 basis points to a mid-price of 79 basis points as of 4:13 p.m. in New York, according to prices compiled by Bloomberg. That’s about the lowest intraday level since Aug. 26.

An increase in Chinese exports and faster-than-estimated growth in Japan bolstered investor confidence that a strengthening global economy will boost the ability of companies to repay debt obligations.

“Evidence that the euro area, Chinese and Japanese economies are gaining momentum is the primary catalyst behind a renewed appetite for risk in the credit markets,” Edward Marrinan, a macro credit strategist at Royal Bank of Scotland Group Plc’s securities unit in Stamford, Connecticut, said in a telephone interview.

Credit swaps 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. The measure typically falls as investor confidence improves and climbs as it deteriorates.

Chinese exports jumped 7.2 percent last month compared with the previous year, the General Administration of Customs said in Beijing yesterday.

Neiman Swaps

Japan’s gross domestic product grew an annualized 3.8 percent from the first quarter, higher than an initial estimate of 2.6 percent, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 3.9 percent increase.

Neiman Marcus Group Inc.’s credit risk is set to rise to the highest level in a year after the Dallas-based luxury chain agreed to sell itself to Ares Management LLC and the Canada Pension Plan Investment Board for $6 billion.

Five-year credit swaps tied to the debt of Dallas-based Neiman Marcus rose 99 basis points to 391 basis points as of 3:37 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s the highest level since the swaps closed at 392.5 in September 2012.

Tenet Offering

Tenet, the third-biggest publicly traded U.S. hospital chain, may sell $2.8 billion of 8.5-year bonds and $1.8 billion of seven-year notes this week to help finance the purchase of Vanguard Health Systems Inc. (VHS), according to a person with knowledge of the transaction, who asked not to be identified because terms aren’t set.

Tenet agreed to purchase Vanguard in June for about $1.8 billion. The bond sale, which may occur on Sept. 13, is poised to be the Dallas-based company’s largest on record, according to data compiled by Bloomberg.

The risk premium on the Markit CDX North American High Yield Index, a credit-swaps benchmark tied to speculative-grade bonds, fell 16.5 basis points to 382.2, Bloomberg prices show.

The average extra yield investors demand to hold dollar-denominated, investment-grade corporate bonds rather than similar-maturity Treasuries widened 1.2 basis points to 132.8 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt widened 3.7 basis points to 601.3.

Investment-grade debt is rated Baa3 or higher at Moody’s Investors Service and at least BBB- by Standard & Poor’s.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

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

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