Credit Swaps in U.S. Fall to 2-Week Low; Crown Castle Plans Bond

A gauge of U.S. corporate credit risk fell to the lowest level in two weeks as companies added more jobs than estimated last month.

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, decreased 2.2 basis points to a mid-price of 96.1 basis points at 4:50 p.m. in New York, according to data compiled by Bloomberg. Contracts tied to Hewlett-Packard Co. rose to the most since July.

The measure dropped as ADP Employer Services said companies added 162,000 jobs in September, exceeding the 140,000 median estimate of 38 economists surveyed by Bloomberg, allaying investor concern that the recovery is weakening. The Institute for Supply Management’s index of U.S. non-manufacturing businesses rose to 55.1 last month, up from 53.7 in August. Readings above 50 signal expansion.

“We still believe that this is a slow-growth environment with modest job growth,” John Donaldson, director of fixed income at Radnor, Pennsylvania-based Haverford Trust Co., said in a telephone interview. Corporate bonds remain attractive as “one of the few answers to both yield and call protection,” enabling investors to “minimize reinvestment risk,” he said.

The credit-swaps index 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.

Crown Castle

Crown Castle International Corp., the junk-rated provider of infrastructure for wireless communications, sold $1.65 billion of 5.25 percent notes that mature in 2023, according to data compiled by Bloomberg. Proceeds from the bond issue, along with cash and funds from its revolving credit line, may be used to help finance the company’s purchase of rights to operate cellular towers of Deutsche Telekom AG’s T-Mobile USA unit, Houston-based Crown Castle said today in a statement.

APA Group, the Australian natural gas transporter, sold $750 million of 3.875 percent, 10-year notes in its first U.S. benchmark bond sale, according to data compiled by Bloomberg. Proceeds from the issue, made through its APT Pipelines Ltd. financing unit, will be used to pay existing debt and for general corporate purposes, a person familiar with the offering said.

Relative Yields

The average relative yield on speculative-grade debt rose 1 basis point, led by the spreads on junk-rated bonds of utility companies, which widened 4 basis points, Bloomberg data show. High-yield, high-risk securities are rated below Baa3 by Moody’s Investors Service and less than BBB- by Standard & Poor’s.

Credit swaps tied to Hewlett-Packard rose 28.9 basis points to 302.3 basis points, the highest level since July 23, at 3:30 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. CEO Meg Whitman forecast fiscal 2013 profit that missed estimates and said a turnaround at the Palo Alto, California-based company won’t happen soon.

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