Credit Swaps in U.S. Rise; T-Mobile Plans $2 Billion Debt Sale

A gauge of U.S. company credit risk rose after touching the lowest level in six years as investors bet that the Federal Reserve will continue the pace of its monetary stimulus in the coming months. T-Mobile US Inc. (TMUS) is planning to sell $2 billion of bonds in two parts.

The Markit CDX North American Investment Grade Index, a credit-default swaps measure that investors use to hedge against losses or to speculate on creditworthiness, increased 1.1 basis points to 71.4 basis points as of 4:01 p.m. in New York, according to prices compiled by Bloomberg. Earlier, the benchmark declined to 69.5 basis points for the lowest level since since Nov. 6, 2007, in data that adjust for the effects of the market’s shift to a new version of the index in September.

The index has decreased since Janet Yellen, nominated to be the next chairman of the Fed, said last week that the central bank will carry on stimulus for an economy that’s operating well below potential. Traders are speculating Yellen will maintain the Fed’s current pace of monthly bond purchases at its December meeting, according to Matthew Duch, who helps oversee $12 billion at Bethesda, Maryland-based Calvert Investments Inc.

“Yellen is still committed to this policy so far. She doesn’t want to rattle the markets and she knows that things are fragile right now,” Duch said in a telephone interview. “As long as the Fed remains committed to very accommodative monetary policy, there’s little feeling that things can get worse.”

Bond Buying

Federal Reserve Bank of Philadelphia President Charles Plosser, who has opposed additional stimulus, said in Philadelphia that it’s “just not practical” to adjust the Fed’s pace of bond buying in response to changes in the economy because shifts cause confusion and the correct levels aren’t clear.

The swaps index typically rises as investor confidence deteriorates and falls as it improves. 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.

New York Fed Bank President William C. Dudley said he’s “getting more hopeful” the U.S. economy is gaining strength as the drag from fiscal policy wanes. The central bank’s monetary policy is likely to be accommodative for a long time, he said today.

The central bank’s policy makers will probably pare the $85 billion monthly amount of bond buying to $70 billion at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8.

T-Mobile Offering

T-Mobile USA Inc., a unit of T-Mobile US Inc., intends to sell notes due in 2022 that can be redeemed in four years and securities that mature in 2024 that can be called in five years, the Bellevue, Washington-based company said in a statement today.

Proceeds may be used for general corporate purposes, including capital investments, enhancing financial flexibility and purchasing additional spectrum, according to the release.

Cheniere Energy Partners LP (CQP), the owner of the Sabine Pass liquefied natural gas export project in Louisiana, may issue $1 billion in 8.25-year securities that are expected to be rated Ba3 by Moody’s Investors Service as soon as today, according to a person with knowledge of the transaction, who asked not to be identified because terms weren’t set.

The risk premium on the Markit CDX North American High Yield Index, a credit-swaps benchmark tied to speculative-grade bonds, rose 2.7 basis points to 350.4 basis points, Bloomberg prices show. A basis point is 0.01 percentage point.

The average extra yield investors demand to hold dollar-denominated, investment-grade corporate bonds rather than similar-maturity Treasuries decreased 0.5 basis point to 129.8 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt rose 0.7 basis point to 555.7.

High-yield, high-risk, or junk debt is rated below Baa3 by Moody’s and lower than BBB- at 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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