Credit Swaps in U.S. at About Three-Month Low on Greek Prospect

A gauge of corporate credit risk held near the lowest in more than three months as speculation mounted that leaders will make progress on Greece’s debt crisis at meetings this week.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses on corporate debt or to speculate on creditworthiness, rose 0.2 basis point to a mid-price of 98.6 basis points at 5:26 p.m. in New York, according to prices compiled by Bloomberg. Credit swaps on Bank of America Corp. and Goldman Sachs Group Inc. fell.

International creditors may adjust the interest on Greek bailout loans, Norbert Barthle, a senior German lawmaker, was quoted as saying by the Passauer Neue Presse. Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, visits Greece tomorrow. The so-called troika of international creditors -- the International Monetary Fund, the European Commission and the European Central Bank -- returns to Athens early next month.

“It has been a great run, and while I do believe the ECB will launch some new programs, we have priced a lot in,” Peter Tchir, founder of New York-based macro strategy firm TF Market Advisors, wrote in an email.

German Chancellor Angela Merkel and French President Francois Hollande meet in Berlin on Aug. 23, before holding separate talks with Greek Prime Minister Antonis Samaras later in the week.

Bank Swaps

The swaps index, which is at about the lowest level since May 3, has dropped 4.6 basis points since Aug. 15. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

Credit swaps tied to Bank of America fell to the least since March 27, declining 10.5 basis points to 216, and those linked to unit Merrill Lynch & Co., which the Charlotte-based bank bought in 2008, eased 17.3 basis points to 218.9, Bloomberg prices show.

Swaps on Goldman Sachs, based in New York, declined 7.4 basis points to 242.4.

Contracts tied to the debt of Best Buy Co. jumped after the retailer resisting a takeover attempt by its founder reported second-quarter profit that trailed analysts’ estimates, and suspended its earnings forecast as sales of computers and televisions dropped.


Swaps protecting against the company’s default for five years climbed 1.6 percentage points to 13.6 percent upfront, CMA data show. That’s in addition to 5 percent a year, meaning it would cost $1.36 million initially and $500,000 annually to protect $10 million of Richfield, Minnesota-based Best Buy’s debt.

Excluding restructuring charges and other items, profit was 20 cents a share, the company said today. Analysts’ average estimate was 31 cents.

Best Buy yesterday named Hubert Joly as its new chief executive officer to oversee a turnaround plan that entails shifting to smaller locations in a bid to fend off Inc. and Wal-Mart Stores Inc. The results, which included a 3.2 percent same-store sales decline as shoppers bought fewer televisions and notebook computers, may bolster founder Richard Schulze’s case that the company needs urgent change.

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