A gauge of U.S. corporate credit risk increased, reversing a decline from the lowest level in four days.
The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, increased 0.7 basis point to a mid-price of 98 basis points at 4:15 p.m. in New York, according to prices compiled by Bloomberg.
The swaps measure rose as JP Morgan Chase & Co. and Wells Fargo & Co. reported shrinking net interest margins, a gauge of the profitability of lending. The index had earlier reached as low as 95.2 basis points after the Thomson Reuters/University of Michigan preliminary October consumer sentiment index increased to 83.1 from 78.3 the previous month, the highest since September 2007.
“Part of it has to do with some uncertainty with respect to earnings: things will pop in one direction and then fade,” Marc Pinto, head of corporate bond strategy at Susquehanna International Group LLP, said in a telephone interview. “Next week we should get a fair amount of data so that we can see more discernible trends.”
The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. 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.
The cost to protect against losses on the debt of Wells Fargo rose 1 basis point to 84.5 basis points at 4:07 p.m., according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Contracts tied to Sprint Nextel Corp. widened, a day after Japan’s Softbank Corp. confirmed it’s in talks to take a stake of as much as 75 percent of the third-largest U.S. wireless carrier. Sprint’s swaps rose 25.9 basis points to 388.3 basis points at 3:30 p.m. in New York, CMA data show.
Gulfport Energy Corp. sold $250 million of eight-year, dollar-denominated bonds to repay borrowings and prefund drilling expenditures, according to a person familiar with the offering, who asked not to be identified because terms aren’t set. The 7.75 percent notes were priced to yield 672 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg.
The average relative yield on investment-grade debt fell 2 basis points, led by communications and energy companies, whose spreads narrowed 2 basis points, according to data compiled by Bloomberg. The relative yield on speculative-grade debt was unchanged, the data show.