A measure of U.S. corporate credit risk approached a two-month low as comments by Russian President Vladimir Putin signaled the crisis in Ukraine won’t immediately escalate. Viacom Inc. (VIAB) is planning a $1.4 billion bond sale.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or to speculate on creditworthiness, declined 2.7 basis points to 62.6 basis points as of 12:33 p.m. in New York, according to prices compiled by Bloomberg. The measure was poised to close at the lowest level this year.
Investors pushed the measure lower after Putin, in his first public remarks since Ukraine said its Crimean peninsula had been taken over by Russian forces, said he reserved the right to use force to defend ethnic Russians while there’s “no such necessity” at present.
“The geopolitical situation seems a little less heady today, which is flowing into credit,” Jody Lurie, a corporate-credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a telephone interview. Investors “are calmer than they were yesterday.”
The swaps gauge typically falls as investor confidence improves and rises as it deteriorates. 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.
Viacom, the media company controlled by billionaire Sumner Redstone, intends to issue five-, 10- and 30-year debt as soon as today, according to a person with knowledge of the transaction. The owner of MTV and Nickelodeon cable channels will redeem its $600 million of 4.375 percent notes maturing in September on April 3, the company said in a statement.
The new securities may be rated Baa2 by Moody’s Investors Service, said the person, who asked not to be identified citing lack of authorization to speak publicly. Viacom last issued bonds in August.
Burlington Northern Santa Fe LLC, which Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) acquired in 2010, plans to sell $500 million of 10-year notes and $1 billion of 30-year debt as soon as today, according to a person with knowledge of the transaction. Proceeds may be used for working capital and to repay debt, said the person, who asked not to be identified, citing lack of authorization to speak publicly.
RadioShack Corp. (RSH)’s $324.8 million of 6.75 percent bonds due May 2019 declined 11 cents to 55 cents on the dollar, the lowest level since the notes were issued in 2011, before trading at 59 cents as of 11:23 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The electronics chain that posted its eighth straight quarterly loss reported revenue of $935.4 million, below the $1.12 billion average estimate of 13 analysts surveyed by Bloomberg, and said it would close as many as 1,100 locations.
The risk premium on the Markit CDX North American High Yield Index, tied to the debt of 100 speculative-grade companies, narrowed 13 basis points to 310.4, Bloomberg prices show. Speculative-grade bonds are rated below Baa3 by Moody’s and less than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.
The extra yield investors demand to hold investment-grade corporate bonds rather than government debt declined 0.3 basis point to 96.8, Bloomberg data show.
To contact the reporter on this story: Jessica Summers in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Shannon D. Harrington at email@example.com