A gauge of U.S. company credit risk fell after a report showed American employers added more workers in October than projected. Statoil ASA led weekly bond sales of $38 billion in the U.S., the busiest in six periods.
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, declined 2.1 basis points to 71.8 basis points at 3:55 p.m. in New York, according to prices compiled by Bloomberg.
Labor Department figures showed employers were increasing hiring to meet greater demand as they looked past last month’s U.S. government 16-day partial shutdown. Stronger employment is a boon for corporate creditworthiness, even amid speculation the report will prompt the Federal Reserve to accelerate a withdrawal of stimulus.
The index widened after the report before falling, indicating an “ambiguous” effect of the jobs data, according to Markit Group Ltd.’s Gavan Nolan.
“In normal times, a stronger labor market boosts risk assets – the U.S. economy is dependent on consumption and more people in work means more spending,” he wrote in an e-mailed note. “But these aren’t normal times, and economic data has to be viewed through the prism of unconventional monetary policy.”
The Fed is buying a total $85 billion of government and mortgage-backed securities a month in a policy known as quantitative easing.
“The pace of the Federal Reserve’s asset purchases depends on labor market conditions, so better than expected jobs numbers may bring the start date of QE tapering forward,” Nolan wrote.
The swaps index typically falls as investor confidence improves and rises as it deteriorates. Credit swaps 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.
Statoil, Norway’s largest oil company, this week raised $4 billion of debt in five parts while Citigroup Inc. issued $1.3 billion of fixed-and floating-rate bonds, according to data compiled by Bloomberg. Offerings were the most since $55.8 billion in the five days ended Sept. 27 and compare with a 2013 weekly average of $30 billion.
Bonds of Mosaic Co. fell a day after a $2 billion offering by the largest U.S. producer of potash and phosphate fertilizer.
The company’s $600 million of 5.625 percent securities due November 2043 fell 1.07 cents from the issue price to 98.84 cents on the dollar, yielding 5.71 percent at 2:32 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The extra yield investors demand to own the debt instead of similar-maturity Treasuries narrowed to 182.7 basis points from 188 at issuance.
The risk premium on the Markit CDX North American High Yield Index, a credit-swaps benchmark tied to speculative-grade bonds, fell 6.8 basis points to 352.6 basis points, Bloomberg prices show.
The average extra yield investors demand to hold dollar-denominated, investment-grade corporate bonds rather than similar-maturity Treasuries rose 0.1 basis point to 127.6 basis points, Bloomberg data show. The measure for speculative-grade, or junk-rated, debt fell 12 basis points to 534.6.
Investment-grade debt is rated Baa3 or higher at Moody’s Investors Service and at least BBB- by Standard & Poor’s.