A gauge of U.S. corporate credit risk climbed for a second day, poised for the biggest jump in more than two weeks.
The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, added 1.4 basis points to a mid-price of 88.6 basis points at 12:11 p.m. in New York, according to prices compiled by Bloomberg. That would be the largest increase since a 4.6 basis-point jump on Dec. 28.
Federal Reserve Chairman Ben S. Bernanke is scheduled to speak at 4 p.m. today in Ann Arbor, Michigan, before economic data this week that may show retail-sales growth slowed and manufacturing in the New York region stagnated. Weakening economic data may heighten investor concern that the economy will falter, hindering companies’ ability to repay debt.
“There is some apprehension about the budget discussion, specially the debt ceiling,” said Michael Kraft, senior portfolio manager at the New York-based Vanderbilt Avenue Asset Management in a telephone interview. “Investors will continue to be conservative for the next couple of weeks, which is also when earnings begin to show some color.”
A failure to reach a compromise to avoid more than $600 billion in spending cuts and tax increases set to take effect this year had increased concern that the economy might tumble into a recession.
Of the 28 companies in the Standard & Poor’s 500 index that reported quarterly earnings, 22 exceeded analysts’ estimates, according to data compiled by Bloomberg. Goldman Sachs Group Inc., EBay Inc. and General Electric Co. are among S&P 500 companies scheduled to report this week.
“In the coming weeks sales numbers are also important,” said Robert Grimm, head of corporate trading at the New York-based Odeon Capital Group LLC, in a telephone interview. “If overall sales numbers are coming weak, it’s not positive. The reality is consumers don’t have money and that shows a negative picture.”
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.
Anheuser-Busch InBev NV, the world’s biggest brewer, and Penske Truck Leasing Co. are leading companies in the U.S. offering at least $3.3 billion of debt today.
The average relative yield on junk-rated debt rose 2 basis points to 4.8 percentage points today. Bonds of financial institutions advanced 3 basis points to 3.33 percentage points, Bloomberg data show. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s. A basis point is 0.01 percentage point.
The risk premium on the Markit CDX North American High Yield Index rose 6.2 basis points to 448.1 basis points, according to prices compiled by Bloomberg.
Credit swaps protecting against losses on the debt of Transocean Ltd., climbed 12.2 basis points to 144.7 basis points as of 11:30 a.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.
Transocean, the world’s largest offshore rig contractor, said yesterday that billionaire Carl Icahn and his affiliates have acquired a 1.56 percent stake in the company and are seeking to expand that to more than 3 percent. Earlier this month, the company agreed to plead guilty to one misdemeanor count of violating the Clean Water Act as owner of the Deepwater Horizon rig that drilled BP Plc’s ill-fated Macondo well off the Louisiana coast in 2010, according to a filing in federal court in New Orleans.